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Exit strategies at St Andrews: G20 must not withdraw economic stimulus too soon, Alistair Darling warns

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Exit strategies at St Andrews: G20 nations should not plan their exit strategies from the life support measures they implemented in the midst of financial crisis until they can ensure recovery is sustainable, the chancellor said tonight.

"There can be no room for complacency among G20 countries this weekend," Alistair Darling told an audience in Edinburgh.

"We must see through measures to support demand and repair the financial system, because we cannot yet be sure the global recovery has sufficient momentum to be sustained and durable.

"I am confident global recovery will come. But we are not there yet. There is still a lot of uncertainty and many risks to be negotiated … As we draw up our plans we must accept that the biggest risk would be to exit before the recovery is real."

Finance ministers from the world's 20 richest nations will begin their two-day summit tomorrow in St Andrews, Scotland. The aim of the meeting is to put flesh on the bones of agreements made at a leaders' summit in Pittsburgh in September.

As well as discussing how and when to withdraw the huge taxpayer support they have given their economies over the past two years, finance ministers are also expected to focus on climate finance ahead of next month's United Nations conference in Copenhagen.

The International Monetary Fund will tell the G20 that the global economic recovery is uneven and the timing of any exit strategies should err on the side of supporting demand.

"The pace of recovery is uneven, particularly in advanced economies, with consumer confidence remaining subdued, the waning of temporary fiscal measures such as the cash-for-clunkers programme in the US and similar programmes elsewhere is slowing production," an IMF paper said.

"One of the key lessons from the experience of similar crises (such as the Great Depression and Japan in the 1990s) is that withdrawing policy stimulus too early can be very costly, particularly if the financial system remains vulnerable and prone to adverse shocks."

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