The Group of 20 leading economies reached an uneasy compromise yesterday over the speed of budget cuts needed to calm global financial markets rattled by a spreading debt crisis in Europe.
G20 finance ministers sought to bolster market confidence by declaring themselves ready to safeguard recovery and stressing the importance of putting their public finances in order.
Without referring specifically to the eurozone's debt troubles, the G20 said recent volatility in financial markets served as a reminder that significant challenges remained despite a faster-than-expected, though uneven, global economic recovery.
"Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions," the G20 said in a communique issued after two days of talks.
The euro plunged to a four-year low on Friday, partly on concerns that Hungary could be facing a debt crisis similar to that of Greece, which had to turn to fellow eurozone members last month for a €110bn bailout.
German finance minister Wolfgang Schaeuble said the meeting had agreed that a determined effort to cut back billowing budget deficits was unavoidable.
But he said the United States and other G20 members had also argued for greater efforts to pump up demand. "There are different opinions," Schaeuble told reporters.
Asked if there had been heated discussion, South Korean deputy finance minister Shin Je-yoon said: "Yes, of course: a lot heat, a lot of heat."
In a letter that he sent to ministers on Thursday, US treasury secretary Timothy Geithner said global growth would fall short of potential unless other countries made up for a drop in demand as debt-strapped households tighten their belts.
Geithner singled out the need for Japan and "European surplus countries" - code principally for export powerhouse Germany - to boost domestic demand.
Meanwhile, US economist Nouriel Roubini was quoted as saying yesterday that the eurozone is facing a period of zero growth if not recession, and the United States is heading for financial trouble.
There was a risk of renewed recession in Europe, Roubini said in an interview with Swiss daily Tages-Anzeiger.
"There is that risk, at least for the eurozone. Growth will fall towards zero. Even if that is perhaps not a real recession, it will feel like one. Greece was just the tip of the iceberg," he said.
Roubini, known as Dr Doom and best known for predicting the US housing crisis, said there was a risk of a second financial crisis, with countries becoming insolvent and being forced out of the euro, and banks collapsing.