Europe firm on budget cuts

EUROPEAN policymakers defended budget austerity plans yesterday ahead of a G20 summit set to pit calls for fiscal restraint against warnings that heavy cost-cutting threatens recovery.

EUROPEAN policymakers defended budget austerity plans yesterday ahead of a G20 summit set to pit calls for fiscal restraint against warnings that heavy cost-cutting threatens recovery.

European Central Bank president Jean-Claude Trichet said it was wrong to claim that budget austerity would cause stagnation, and German Chancellor Angela Merkel said her country would stick to plans to save ß80billion (about R750billion) in the next four years.

After winning plaudits for guiding the world economy through the financial crisis, splits have emerged among G20 powers over which policy priority ought to take precedence now - supporting still-shaky growth or shrinking budget deficits.

Markets remain jittery about the debt crisis and the risk of an economic slowdown in the run-up to the meeting of G20 leaders this weekend, with the cost of protecting government debt against default hitting a record high for Greece and jumping in other countries such as Portugal. - Reuters

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