Obama urges G20 to keep up spending or endanger recovery (1st Lead)

Jun 17, 2010, 18:38 GMT

Washington - US President Barack Obama urged other world powers to keep up public spending levels or risk eroding the global economic recovery, in a letter to other Group of 20 (G20) leaders obtained by the German Press Agency dpa Thursday.

With many European governments saddled by debt and announcing major austerity plans, Obama warned that the world's recovery from a deep recession last year remained extremely fragile.

'We worked exceptionally hard to restore growth; we cannot let it falter or lose strength now,' Obama warned in the letter.

Obama said in the letter dated Wednesday that the economic recovery must be the 'highest priority' of world leaders when the G20 bloc of major industrial and emerging powers meets for a summit later this month in Toronto. Budget deficits should be cut back over the 'medium term.'

'We meet at a time of renewed challenge to the global economy,' Obama said. 'We must act together to strengthen the recovery.'

Obama's letter sets up a potential clash with European leaders that pivoted in the last weeks to cutting their massive budget deficits, hoping to avoid widening a debt crisis that originated in Greece earlier this year.

A communique from G20 finance ministers earlier this month notably left out calls to maintain fiscal stimulus measures until the global recovery was solidified, instead focusing on the importance of sustainable government budgets.

But Obama urged the G20 to 'reaffirm our unity of purpose to provide the policy support necessary to keep economic growth strong.'

US lawmakers are considering fresh measures to stimulate job growth in the United States, which remains at nearly 10 per cent despite a resumption in growth.

Obama has insisted he intends to cut the US' skyrocketing budget deficit over the medium term, but strongly supports more short-term spending measures to keep the world's largest economy afloat.