April 24 (Bloomberg) -- Group of 20 finance chiefs called for “credible” plans to withdraw economic stimulus as the recovery strengthens and Greece’s attempt to avert default highlights the risks posed by mounting government debt.

“The global recovery has progressed better than previously anticipated,” the group’s finance ministers and central bankers said in a statement after meeting in Washington yesterday. “We should all elaborate credible exit strategies from extraordinary macroeconomic and financial support measures.”

Underscoring the need to persuade investors that order will be restored to public finances was Greece’s appeal yesterday for emergency loans after a surge in its borrowing costs. The International Monetary Fund this week called rising government debt one of the biggest threats to the world economy.

“I don’t think there’s complacency among policy makers, but the question is whether they’re preparing for the worst-case scenario,” said Harvard Professor Kenneth Rogoff, a former IMF chief economist and co-author of a recent study of financial crises, in an interview. “They seem to be hoping for the best.”

The G-20 asked the IMF to carry out more research on how banks can cover the cost of future bailouts, papering over a split over whether a tax on risk-taking should be imposed. It reiterated a plan to develop rules by the end of this year to raise the quantity and quality of bank capital with the intention of implementing them before 2013.

Exchange Rates

While the statement made no specific comment on exchange rates and officials said they weren’t discussed, U.S. Treasury Secretary Timothy F. Geithner maintained pressure on China to let its yuan appreciate.

“China will decide it’s in their interest,” he told reporters. “It’s obviously important to the world.”

Greece’s request for as much as 45 billion euros ($60 billion) in international aid this year set the backdrop for the G-20’s talks. It came as investors demand almost triple what they charge Germany for the country’s 10-year bonds and a day after the European Union estimated its budget deficit reached 13.6 percent of gross domestic product last year and Moody’s Investors Service cut its credit rating.

“We did discuss the situation in Greece,” Canadian Finance Minister Jim Flaherty said. “It is, of course, a source of concern for us.”

Rising Debt

Greece’s fiscal turmoil may serve as a warning to many governments that they will soon need to pare the budget deficits swelled by lower tax revenue and spending during the crisis. The IMF estimates the debt of advanced nations will reach 115 percent of GDP by 2014, up from 80 percent before the financial crisis and close to the postwar record.

“We need to prevent sovereign risk from spreading to other nations,” Hiroshi Ogushi, Japan’s parliamentary secretary for finance, said in an interview in Washington.

The G-20 said some governments may have to maintain spending measures until the “recovery is firmly driven by the private sector and becomes more entrenched.” Nations that can expand domestic demand should do so to help compensate for those that need to boost savings, the statement said without naming countries.

The officials met amid signs recoveries are picking up speed. Data released yesterday showed sales of new U.S. homes surged the most in 47 years in March and euro-area industrial orders rose more than forecast in February.

Equities

Stocks from the U.S. to Japan to Germany are all up at least 3.5 percent so far this year.

American Express Co., the biggest U.S. credit-card issuer by purchases, reported first quarter profit doubled as consumers boosted spending. German sporting-goods maker Adidas AG raised its full-year earnings forecast. Xerox Corp., the largest maker of high-speed color printers, said its second-quarter profit forecast beat analysts’ estimates.

Paris-based L’Oreal SA, the world’s largest cosmetics maker, this week said sales growth accelerated to the fastest pace in almost three years as shoppers spent more on luxury perfume and distributors stopped cutting inventories.

Still, the Greek crisis threatens to “delay confidence coming back to the world economy” so the euro area must “get on” with assisting the country, U.K. Chancellor of the Exchequer Alistair Darling said in Washington.

Aid Package

EU Economic and Monetary Affairs Commissioner Olli Rehn said a program could be agreed upon by early May. European Central Bank Governing Council members Ewald Nowotny and Christian Noyer rejected speculation that Greece’s troubles will spread to other high-deficit countries such as Portugal and Spain.

Having united to inject $5 trillion in fiscal stimulus to combat the slump, the G-20 is now struggling to find common ground over how best to regulate banks. Divides opened before the talks about whether to tax banks to pay for future rescues and how to rewrite capital rules.

The IMF, which this week recommended taxing financial institutions’ non-deposit liabilities and the sum of profit and compensation, will now study how to account for differing “circumstances.” While the proposal has won support from the U.S. and Europe, some governments led by Canada questioned the need for it given none of their banks collapsed and a levy may sap them of resources.

“There were lots of viewpoints,” French Finance Minister Christine Lagarde told Bloomberg Television. “We need to continue the discussion.”

Industry’s Response

Bowing to criticism from bank groups concerned their members are being punished, the G-20 acknowledged a need to “take into account the cumulative impact of” regulatory changes even as it promised “multi-faceted” reform.

Meeting the year-end deadline for outlining new rules “would reduce the ability of the industry to provide capital to business and consumers,” Tim Ryan, chief executive officer of the Global Financial Markets Association, said in a statement. “We are also concerned at proposals to levy punitive taxes.”

The G-20 also fleshed out how it will check whether members are working to ensure the next expansion is more balanced and less reliant on extremes such as U.S. consumer spending or Chinese savings. Tasked with overseeing that process, the IMF was told to prepare lists of policies authorities should be pursuing and when to enact them.

China entered the meeting facing demands from the U.S., euro-area, Brazil and India to allow the yuan to gain after keeping it about 6.83 to the dollar for almost two years to aid exporters. The G-20 noted in its statement that sustainable growth should be “determined primarily by competitive market forces.”

The G-20 accounts for about 85 percent of global GDP. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., U.K. and EU. The group’s finance ministers next meet June 4-5 in Busan, South Korea, before leaders convene later that month in Toronto.

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