Britain insists it needs cuts after Obama G20 letter

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Britain insisted on Monday that it still needs to tackle its deficit "more quickly" after US President Barack Obama wrote to G20 countries warning against scaling back government spending too fast.

"Different countries have different starting points and for some countries, such as our own, there is a need to get on and tackle the deficit more quickly," Prime Minister David Cameron's official spokesman told reporters.

Obama warned in a letter on Friday that leading world economies should "commit to restore sustainable public finances in the medium term" but avoid scaling back spending too quickly or the global economy recovery could be affected.

Britain's finance minister George Osborne is unveiling an emergency budget Tuesday expected to feature the biggest cuts for decades.

The new government is bidding to rein in state borrowing forecast to reach 155 billion pounds (185 billion euros, 230 billion dollars) or 10.5 percent of gross domestic product (GDP) in the year to March 2011.

European countries led by Germany say cutbacks are needed now amid worries about the health of the eurozone, fuelled by huge public debts in Greece and Spain.

But the US worries that the global recovery may be derailed if government stimulus is withdrawn too early.

Cameron's spokesman added that Britain supported Obama's call for flexible exchange rates.

In a major announcement Saturday, China's central bank said it would "further promote the reform" of the Chinese currency's exchange rate mechanism and "strengthen the flexibility" of the yuan.

China has often been accused of keeping its currency artificially low to boost its exports.

"I think we would agree with what was said in that letter to G20 leaders about the need for flexibility," Cameron's spokesman said.

"The implementation of fiscal policy needs to reflect the particular circumstances of the countries concerned and that surplus countries need to expand domestic sources of growth and that way we can tackle imbalances."

© 2010 AFP

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