The global economic crisis is not over and unemployment will still go up in the months to come, the leaders of Britain, France and Germany warned on Thursday before a meeting of G20 policymakers in London this weekend.
In a letter to their European Union colleagues, the leaders of Europe's three biggest economies said there was no alternative to keeping the extraordinary stimulus in place for now but plans should be made for its coordinated withdrawal.
"We must be careful to avoid laying the foundations of new global imbalances," wrote British Prime Minister Gordon Brown, President Nicolas Sarkozy and German Chancellor Angela Merkel.
"Therefore we should work on exit strategies to be implemented in a coordinated manner as soon as the crisis has ended."
With public anger at financial sector excess still high at a time when job losses look set to climb further, the leaders also said that banks could not just go back to business as normal and would have to rein in their risk-taking and bonus culture.
A G20 leaders' summit in Pittsburgh on Sept. 24-25, they wrote, should also deliver binding rules on limiting excessive bonuses though there was no explicit mention of any kind of extra tax that has been mooted previously by the French.
"Our citizens are deeply shocked at the revival of reprehensible practices, despite taxpayers' money having been mobilized to support the financial sector at the height of the crisis," the letter said.
They said bonuses at banks should be deferred over times to discourage short-termism and be subjected to clawback in the event of things turning bad.
They also called on their finance ministers, meeting in London, to look at enhanced regulation of systemically important banks and ways in which these institutions can be wound up if needed without shaking the financial system.
TURNING THE CORNER
Earlier, new forecasts from the Organisation for Economic Co-operation and Development on Thursday showed the global recession coming to an end faster than thought just a few months ago, with signs that it may already be over.
European Central Bank chief Jean-Claude Trichet also said that he saw increasing signs the recession was bottoming out, as the central bank upgraded its economic growth forecasts after leaving interest rates unchanged at a record low of 1 percent.
Policymakers have been surprised by better-than-expected data in the second-quarter, particularly in the euro zone. But they are worried that any recovery will be sluggish and that it may take ages for output to get back to normal.
GDP in Germany in the second quarter was 5.9 percent lower than a year ago. In Britain, it was down 5.5 percent.
"Labour markets will suffer the consequences of low capacity utilisation over the months to come," the leaders wrote.
"Together we must send a message from Pittsburgh that we are fully and firmly resolved to implement our stimulus plans."
The United States had much the same message. "We've come a very long way. We have a very long way to go still," U.S. Treasury Secretary Timothy Geithner said late on Wednesday.
He will be flying to London for a finance ministers' meeting hosted by Britain's Alistair Darling on Friday and Saturday that will lay the groundwork for the Pittsburgh summit.
Other areas of discussion will be making sure international institutions like the International Monetary Fund get the full resources promised to it at April's London G20 summit, when the world was still in the grip of a major recession.
The ministers will also discuss at a dinner on Friday how the IMF and the World Bank can be reformed to reflect better the emergence of new economic powers like China and India.
Other topics will include where economic growth will come from if the U.S. consumer remained subdued as is generally expected.
"Many countries will have to rebalance their domestic economies," a senior UK government official said on Wednesday, moving away from export-led growth to greater domestic demand.
