Leaders of the Group of 20 meeting in Toronto, Canada have agreed that the world's most advanced industrialized countries should reduce their budget deficits by half within three years, with further steps to cut debt relative to economic output by 2016.
The G20, which includes major industrialized powers in the Group of Eight plus developing nations with significant economies such as China and India, agreed to a specific time line for deficit reduction, while giving governments flexibility to adjust the pace of changes based on their own situations.
A plan promoted by host Canada will have the most advanced countries cut their budget deficits in half by 2013. By 2016, governments would be required to stabilize or begin reducing the percentage of their debt as measured against total gross domestic product, the value of all goods and services produced in a given country.
Canada's Prime Minister Stephen Harper, who in opening the summit said nations are walking an economic "tightrope," noted that the G20 declaration leaves room for continuing stimulus measures and steps to bring down debt.
"All leaders recognize that fiscal consolidation is not an end in itself," he said. "There will be a continued role for ongoing stimulus in the short-term as we develop the framework for strong, sustainable and balanced growth."
The declaration calls recovery so far from the global economic crisis uneven and fragile, with unemployment at unacceptable levels in many countries. It says unprecedented and globally coordinated fiscal and monetary stimulus is playing a major role in helping to restore private demand and lending.
Saying serious challenges remain, G20 leaders recognize the risks to recovery from fiscal adjustment across several major economies. But they add that failure to implement fiscal consolidation where it is needed could undermine confidence and hamper growth.
President Barack Obama and other U.S. officials argued strongly at the summit against any early slowing of stimulus spending by governments, saying that it might bring about a second global recession.
In his concluding news conference, the president was asked about divisions on this issue. He said the declaration reflects policies that the United States has promoted and addresses a range of needs.
"In each country, what we have to recognize is that the recovery is still fragile, that we still have more work to do to make this recovery durable," he said. "But we also have to recognize that if markets are skittish and don't have confidence that we can tackle the tough problems of our medium- and long-term debt and deficits, then that also is going to undermine our recovery."
The president said the declaration shows that G20 nations can bridge their differences and coordinate approaches while continuing to focus on durable growth that puts people to work and broadens prosperity.
The G20 declaration recognizes U.S. concerns, saying that sustaining economic recovery requires nations to follow through on delivering existing stimulus plans, while working to create the conditions for robust private demand.
On other key issues, European nations such as Britain, France and Germany failed to win G20 agreement for new taxes on banks as part of efforts to discourage excessive risk-taking that could lead to another financial crisis. The declaration leaves such a tax up to individual members.
G20 nations pledge a medium-term phase out of what they call inefficient fossil fuel subsidies, although this would take into account what they call vulnerable groups and their development needs.
Where the world's poorest countries are concerned, the G20 says that narrowing the development gap and reducing poverty are integral to a broader objective of achieving strong, sustainable and balanced growth.
At the last of bilateral meetings at the G20, Mr. Obama met on Sunday with Indonesia's President Susilo Bambang Yudhoyono, India's Prime Minister Manmohan Singh and Japan's Prime Minister Naoto Kan.
President Obama discussed the U.S.-India Strategic Partnership, and joint efforts on climate change. Mr. Obama said he looks forward to his trip to India in November. Prime Minister Singh called President Obama a "role model for billions and billions of people" around the world.
After the G20, President Obama returns to Washington, where he will be waiting for Congress to give final approval to legislation that will impose sweeping new regulations on the U.S. financial system.
G20 leaders say they look forward to their next meetings - in Seoul, South Korea in November, and next year in France. Mexico assumes the G20 chairmanship in 2012.