WRAPUP 7-G20 wary of overconfidence; Greece cast long shadow

* G20 communique: Recovery faster than expected

* No mention of Greece in end of meeting statement

* Sharpest division over bank tax proposal

* No mention of currencies, yuan and euro not discussed

(Adds analyst comment)

By Louise Egan and Francesca Landini

WASHINGTON, April 23 (BestGrowthStock) – G20 finance leaders said
on Friday they had secured a better-than-expected global
economic recovery but were wary of overconfidence as Greece’s
debt crisis put the focus on worsening public finances.

The Group of 20 rich and emerging countries failed to forge
consensus on how best to recoup the cost of bailing out
financial firms, whose risky bets sent the global economy into
its worst tailspin since World War Two.

They also skirted over the thorny issue of whether China
should allow its yuan currency to rise more rapidly to curb its
export-driven growth [ID:nN23188650]. Officials said there was
no discussion of specific exchange rates.

In a six-page communique released at the meeting’s
conclusion, finance ministers and central bankers said the
recovery “has progressed better than previously anticipated”
and credited their own efforts with helping to end the
financial panic that gripped the global economy a year ago.

Despite that upbeat assessment, Canadian Finance Minister
Jim Flaherty said the International Monetary Fund had cautioned
the G20 against overconfidence.

“There was some significant concern that some countries had
been too optimistic in their economic projections and that
cumulatively there was perhaps too much optimism,” he said.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ TAKE A LOOK-IMF, G20 meetings [ID:nN14251988] TEXT-Communique from G20 meeting [ID:nN23195001] Key quotes from global financial leaders [ID:nN23155741] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

While Greece was not formally on the agenda, it was a hot
topic both at the G20 and on the sidelines, where officials
rallied behind aid expected to be worth up to 45 billion euros
($60.5 billion), potentially the biggest-ever bailout of a
country. (For more on Greece, see [ID:nLDE63M0XZ])

Finance ministers said they would not allow debt troubles
to fester and threaten the European Union or world economy.

“If the house of your neighbor is on fire, even if it is a
small house and, maybe, it is your neighbor’s fault, you’d
better not ignore the fire,” Italian Economy Minister Giulio
Tremonti said.

“You’d better use a fire extinguisher, if you have it, and
we have it. Otherwise the fire will reach your house as well,
even if it is a beautiful and big house.”

European Union Economic and Monetary Affairs Commissioner
Olli Rehn said European officials expected to complete work on
a program for Greece by early May.


The G20 has largely supplanted the rich-only G7, an
acknowledgment that the financial crisis emanated from a rich
world that now needs help from fast-growing emerging
powerhouses to solve global problems.

The message from this meeting was similar to that agreed in
September, when G20 heads of state laid out broad principles on
enacting regulatory reform, securing economic recovery, and
rebalancing global growth.

Finance ministers will meet in Korea in early June, ahead
of a leaders summit in Toronto later that month, and officials
said they were hopeful for more concrete progress then.

Economists agree that efforts to pump a combined $5
trillion in stimulus money into the economy and cut interest
rates to the bone have stopped the economy’s free-fall.

However, the rescue left most advanced economies
shouldering debt burdens approaching World War Two highs, and
Greece’s fiscal troubles highlighted how risky that can be.

Derek Scissors, an economist with the conservative
Washington think tank the Heritage Foundation, said the G20 was
pushing for conflicting goals of stimulus to nurture the
recovery and fiscal restraint to ward off a new crisis.

“They’re going to have to decide which is more important:
sound public finance or the policy stimulus that shifted
corporate debt to sovereign debt,” he said.

“Attempting to embrace both in the first substantial
paragraph (of the communique) doesn’t engender credibility.”

The G20 stressed the need to “elaborate” on how countries
will withdraw emergency spending and lending programs without
jeopardizing the recovery, but acknowledged that different
recovery rates meant countries needed different policies.

The sharpest division was over an IMF proposal to levy
taxes on banks so that taxpayers would not foot the bill for
costly bailouts. Britain and the United States have pushed for
such policies, while Canada has been the most vocal opponent.

Canada’s Flaherty said he thought sentiment was swinging
toward his country’s position.

When asked about that, U.S. Treasury Secretary Timothy
Geithner showed a flash of humor: “All things are swinging
Canada’s way. They won the medal in the Olympics — the hockey
medal,” he said, referring to Canada’s victory over the United
States in Vancouver. “That’s a good sign for Canada.”
(Reporting by G20 team; writing by Emily Kaiser; editing by
Patrick Graham)

WRAPUP 7-G20 wary of overconfidence; Greece cast long shadow