Finance ministers and central bankers from the G20 countries agreed on one thing this weekend: the need to sustain a precarious global economic recovery.
Where they differ is on how.
The world's leaders are grappling with tension arising from the challenge of knowing whether it's time to turn off the stimulus taps and focus on restraint, or whether the economic situation demands a more measured approach.
On one side is U.S. Treasury Secretary Timothy Geithner, who said the world can not bank on the cash-strapped American consumer to drive growth and urged other nations to stimulate their own demand. "Stronger domestic demand in Japan and in the European surplus countries" is needed, Mr. Geithner told reporters in Busan, South Korea. Fiscal consolidation, while necessary, should be done over the "medium term."
On the other is European Central Bank President Jean-Claude Trichet, who said fiscal tightening in "old industrialized economies" would aid the expansion by shoring up investor confidence. It's a position that was supported by French Finance Minister Christine Lagarde, who said "For the vast majority, addressing finances, budget consolidation, is priority No. 1."
The meeting in Busan, South Korea, took place ahead of a gathering of G20 leaders in Toronto June 26-27, where a key part of their work will be to outline how they will wind down stimulus spending without upsetting the recovery.
The fact is that arguments over sovereignty continue to provide the underpinning of virtually every debate at the G20 table. Former Prime Minister Paul Martin
Each strategy carries threats for the global rebound that the G20 said faces "significant challenges." Continued stimulus risks bondholder revolt over rising debt burdens, while spending cutbacks could worsen unemployment. Relying on exports leaves the world prone to trade wars and competitive currency devaluations as countries seek to give their companies an edge.
The twist in these talks is a call - supported by Canada - that every G20 member outline individual economic recovery plans and submit them to an independent review - likely by the International Monetary Fund - and by other G20 countries.
This sets up a historic test of whether fiercely independent world powers like the United States and China will allow other countries to judge the soundness of their economic plans.
The issue is on the agenda for Toronto and was discussed by G20 finance ministers over the weekend. Without naming other countries, Finance Minister Jim Flaherty said there is general support for these independent reviews, but some countries don't want the reports to become public.
"There is some concern about sovereignty and not having public disclosure of an assessment of a particular country," he said in an interview. "But I think as we go through the process and it becomes entrenched, that it will gradually become more acceptable."
The U.S. and China have long objected to anything that appears to violate traditional concepts of sovereignty. Canada is pushing for this to change and one G20 official claims there has so far been no strong resistance to the idea.
Former prime minister Paul Martin, who helped create the G20 finance ministers' forum, says sovereignty is now, and has always been, the key issue before the G20.
"The fact is that arguments over sovereignty continue to provide the underpinning of virtually every debate at the G20 table," he writes in the latest issue of Policy Options. "Well, the time has come to move on... The fact is effective global co-ordination does not mean the slow road to global government, as some seem to fear."
For his part, U.S. Treasury Secretary Tim Geithner praised the value of the G20 for encouraging countries to work together to serve broader interests in a strong economy. While he did not address the assessment debate directly, he expressed support for G20 reforms discussed over the weekend.
"The value of the G20 is to help each of us individually recognize the importance of economic policies that are in our broad collective interest," he said.
"We will give our full support to the G20 agenda of growth and reform."
With files from BloombergReport Typo/Error