India, US and emerging economies like Russia, China and Brazil may not concede to

RELATED ARTICLES S&P may cut G20 nations as of 2015 on health costs Germany and France seek relaxation of bank capital rules Germany and France seek relaxation of bank capital rules IMF seeks more funds, G20 to discuss

demands for immediate and total withdrawal of economic stimulus packages pushed for by Germany, France and other key European Union members in G-20.

At the weekend summit of G-20 leaders in Toronto, the members-countries may be given the flexibility to withdraw stimulus measures, cut budgets or impose banking tax if required.

German chancellor Angela Merkel has been a hard line proponent of universal banking transactions tax to bail out economies in sovereign debt crisis. The debt crisis kicked in after financial crisis unfolded after 2008 markets collapse in EU and US.

United Kingdom government headed by Liberal Democrats and Conservatives has already announced its decision to go ahead with taxing all banking transactions. It has also announced wide-ranging austerity measures to cut deficits.

As on Thursday, consensus on most key issues eluded even as two-day meetings of sherpas, finance ministers and finance deputies at Toronto continued to make last minute attempt to find common ground.

A key negotiator close to developments maintained, “it is less to do with developing versus developed countries especially after Euro zone crisis has taken a toll on several countries pushing them into sovereign debt crisis”.

“The challenge is to find a right balance between achieving fiscal consolidation, keep the demand going and at the same time take care of precarious situation in some EU economies,” he said.

Asked if there was some negotiating room on imposition of universal banking tax, the official said, “Frankly speaking no. We don’t like it. Why should we pay to set things right elsewhere” he said.

Referring to the Euro zone crisis that unfolded in last few weeks, he referred to huge bailout packages put in place for Spain, Greece and Hungary. French President Sarkozy had written to the G-20 leaders recently supporting the universal banks transaction tax to create an emergency crisis fund. But, there are not many takers for either the banks tax or the withdrawal of stimulus packages.

Prime Minister Manmohan Singh’s statement ahead of Toronto G-20 summit of emerging and developed economies leaders favoured calibrated and gradual withdrawal of stimulus packages.

However, Prime Minister Singh’s statement recognizes the “new worrying signs that have emerged in the Euro zone”. He also pointed to “growing concerns over expansionary fiscal policies” articulated by Merkel, Sarkozy and co.

Singh said, “to meet our ambitious development targets it is necessary that the global economy continue to recover in a stable and predictable manner”. In the Indian context, he emphasized the need for continued capital inflows and investment. Capital and investment inflows are likely to be adversely impacted in case stimulus packages are withdrawn immediately thereby dampening the demand revival for goods and services.

Other issues that may figure prominently at the G-20 leaders summit as well as working dinner on Sunday include new regulations for banks and financial institutions like higher capital adequacy norms, providing higher voting rights for developing countries in IMF, the formula for which continues to hang fire. “Moving forward from here is complex for

G-20 leaders as the economic matrix is diverse for different countries” said a source close to the development.

G-20 leadership has already agreed upon the 4.8 percent enhanced voting rights for developing countries in World Bank. At IMF, the voting rights are to be raised by 5 percent that needs to be thrashed out, as both have to become operational by March 2011.