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President Obama urges G-20 nations to spend; they pledge to halve deficits

As world leaders gather to discuss the global economy, demonstrators want their message heard.

"Advanced surplus" countries -- developed nations that run large trade surpluses -- committed to try to narrow the gap between imports and exports, a particular concern in Europe, where Germany's powerful export-led economy is blamed by some for economic weakness in Greece and elsewhere.

But the G-20 delegations also left Toronto with much of the heavy lifting on new global financial rules still ahead of them.

Discussion of a global bank tax -- once considered a major issue for the group -- ended with a commitment that the financial sector would make a "fair" contribution to the cost of resolving financial crises, but leaving it to each nation to decide how and when the contribution would be collected.

The group also committed to requiring banks worldwide to hold a "significantly higher" amount of capital to buffer them against financial shock. But acknowledging the difficulty that will pose to some institutions, the group's statement opened the door for a transition period to give weaker companies time to raise the funds.

The G-20 hopes by the end of this year to have new capital rules for banks in place, and leaders consider the issue a core element of global financial reform. But an early test of proposed bank capital rules found that they risked undermining economic growth. Even banks in relatively healthy systems, such as Canada, would have been in a bind and forced to raise substantial new funds, according to bankers and officials familiar with the matter.

"We have the confluence of two forces. One is about making sure there are no more crises, but we have to make sure we don't destroy our domestic banking systems," said Hyun Song Shin, senior economic adviser to the South Korean government. "What you don't want to do is strangle bank lending."

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