A view of the International Monetary and Financial Committee (IMFC) meeting at the IMF headquarters building in Washington April 16, 2011.
Credit: Reuters/Yuri GripasBy Lesley WroughtonWASHINGTON | Sat Apr 16, 2011 4:22pm EDT
WASHINGTON (Reuters) - World finance leaders on Saturday chastised the United States for not doing enough to shrink its massive overspending and warned that budget strains in rich nations threaten the global recovery.
Finance ministers in Washington for semi-annual talks took sharper aim than in previous years at the United States' $14 trillion debt.
While most of the criticism came from emerging market economies, some advanced nations joined the chorus.
Dutch Finance Minister Jan Kees de Jager warned that if the United States and other advanced nations move too slowly it could undermine confidence in the global economy.
"Insufficient budgetary consolidation may spark off further escalation of debt sustainability issues, with repercussions on confidence and the still fragile financial sector," de Jager told the International Monetary Fund's steering committee.
"Debt dynamics in other advanced economies, including the United States, are of concern."
The IMF this week said the U.S. budget deficit was on course to hit 10.8 percent of nation's economic output this year, tying with Ireland for the highest deficit-to-GDP ratio among advanced economies. It urged Washington to move quickly to put a credible plan in place to tighten its belt.
Brazil's finance minister, Guido Mantega, offered sharp words in a thinly veiled attack on the United States. "Ironically, some of the countries that are responsible for the deepest crisis since the Great Depression, and have yet to solve their own problems, are eager to prescribe codes of conduct to the rest of the world," he said.
The Group of 20 countries agreed on Friday to a plan that could put more pressure on the United States to fix its deficits as well as push other leading economies to address their own shortcomings.
The IMF's advisory panel on Saturday said issues of financial stability and sovereign debt stability must be addressed, saying in a communique that "credible actions are needed to accelerate progress." It emphasized the need for fiscal consolidation in advanced economies while avoiding overheating in emerging economies.
The Obama administration and the U.S. Congress are locked in battle over how best to fix the deficit. Republicans are pushing for deep spending cuts as part of the argument over raising the nation's $14.3 trillion debt limit, something which is needed to avoid an unprecedented U.S. debt default.
The Republican-led House of Representatives on Friday approved a plan to slash spending by nearly $6 trillion over a decade and cut benefits for the elderly and poor.
President Barack Obama, who has offered a competing vision to curb deficits by $4 trillion over 12 years, said on Thursday the Republican plan would create "a nation of potholes."
The White House is wary about cutting spending sharply while the economic recovery remains fragile.
Treasury Secretary Timothy Geithner told fellow finance ministers on Saturday caution was needed.
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