LONDON - THE G-20 will promise this weekend to keep economic support packages in place until recovery is certain and seek to reassure financial markets they have credible plans to withdraw the stimulus when appropriate.
Finance ministers and central bankers from the Group of 20 developed and emerging nations are meeting in London to discuss the economic outlook, curbs on bank bonuses, tighter financial regulation and reform of international institutions.
Since their leaders met in April in the midst of the worst global recession since the Great Depression, prospects for the world economy have improved with growth returning in a number of countries and stock markets powering ahead.
But policymakers are cautious about declaring victory yet.
'Unwinding the stimulus too soon runs a real risk of derailing the recovery, with potentially significant implications for growth and unemployment,' said International Monetary Fund chief Dominique Strauss-Kahn at a conference in Berlin on Friday.
G-7 sources have told Reuters that the G-20's communique, due on Saturday, will likely maintain the pledge to keep policy accommodative for as long as was needed.
'The biggest risk is to think that the job's done - that recovery is guaranteed. No country can be complacent - we've got to see this through,' British finance minister and meeting host Alistair Darling said late on Thursday.
Still, with interest rates at record lows and trillions of dollars thrown into their economies to fight the crisis, policymakers are also keen to show they have exit strategies in place lest financial markets take fright that inflation will rocket and public finances fall apart.
'Now is not the time to exit. But I would like to make it clear that the ECB has a strategy, and we stand ready to put it into action when the appropriate time comes,' said European Central Bank President Jean-Claude Trichet said in Frankfurt.
With unemployment still likely to rise forr a while and eat into incumbent government poll ratings, the politicians are also looking for someone to blame and will stress that banks cannot return to business as normal.
France, Germany and Britain on Thursday put forward joint proposals to change the bonus culture at banks that many say was the root of the current crisis. These include deferrals and subjecting payments to clawback but fall short of the tax being advocated by some charities. -- THOMSON REUTERS
