British finance minister George Osborne said the finance ministers and central bankers meeting 40 miles outside London focused on unfinished bank reforms, with signs that plans for a euro zone banking union are fraying.

“It is important to complete swiftly our work to ensure that no banks are too big to fail,” Osborne told reporters after hosting a two-day meeting in a stately home set in rolling countryside.

“We must put regimes in place … to deal with failing banks and to protect taxpayers and to do so in a globally consistent manner,” he said.

The emergency rescue of Cyprus after a near meltdown in March served as a reminder of the need to finish an overhaul of the banking sector, five years after the world financial crisis began.

Germany has come under pressure to give more support to a banking union in the euro zone. The plan could help strengthen the single currency area, but Berlin worries it may pay too much for future bank bailouts if it signs up to a scheme to wind up stricken lenders.

While the first step – to create a single bank supervisor under the European Central Bank – looks set to be in place by mid-2014, a second pillar, a ‘resolution’ fund to close failed banks, is in doubt. And there is little prospect that a single deposit guarantee scheme will ever see the light of day.

A senior U.S. Treasury official said the talks at the 17th-century Hartwell House zeroed in on the need not just for better bank supervision but also to clean up balance sheets so lending can pick up.

“There was a sense of urgency among the euro area participants,” the official said.

German Finance Minister Wolfgang Schaeuble countered that the euro zone was no longer the main risk to the world economy.

As at previous international meetings, Japan escaped any censure for printing money on a scale that has pushed the yen sharply lower.

Osborne said the G7 – the United States, Germany, Japan, Britain, Italy, France and Canada – reaffirmed that fiscal and monetary policy should be aimed at domestic concerns, not currency manipulation.

“We will not target exchange rates,” Osborne said. “I would say that the statement by the G7 of earlier this year was a successful statement and one that has been held to.”

The yen hit a four-year low against the dollar on Friday, driven in part by Japanese investors shifting into foreign bonds, a move that had been expected since the Bank of Japan unveiled a massive stimulus plan.

But having urged Tokyo for years to do something to revive its economy, other world powers are not in a strong position to complain now that it is doing so. Then there is the fact that central banks such as the Federal Reserve and Bank of England have printed money in the way the Bank of Japan is.

Japanese Finance Minister Taro Aso said the G7 had leveled no criticism at Japan’s monetary policy but Schaeuble said there had been “intense discussions” and that the situation would be monitored carefully.

GROWTH DEBATE

Debate has also heated up about the need for governments to ease up on austerity, something Germany, Britain and Canada view with caution but Washington, Paris and Rome favor.

Osborne said there was less disagreement about whether governments should focus on debt-cutting or growth-boosting measures than is commonly assumed.

“Everyone is clear that there needs to be credible medium-term fiscal consolidation … We also agreed that there needs to be flexibility,” he said. “Growth prospects remain uneven and we can’t take the global recovery for granted.”

But his suggestion before the meeting that it should consider what more monetary policy could do to support economic recovery appeared to fall on deaf ears.

“There wasn’t any call to do more,” European Central Bank chief Mario Draghi told reporters after the meeting.

“It is quite clear that all central banks have done a lot, each one within its own mandate. So (the meeting) was just taking note of this … All of us have really been active.”

Several officials from visiting delegations questioned why Britain had called the gathering just three weeks after they and others met at International Monetary Fund meetings in Washington, but Bank of England Governor Mervyn King said the informal nature of the discussions had paid dividends.

“Freed from burden to agree a communiqué, the principals engaged more with each than I can recall before and as a result genuinely made real progress in taking forward some of the questions and issues that are facing the G7,” he said.

(Additional reporting by David Milliken and Leika Kihara.; Writing by Mike Peacock; Editing by Mark Potter)

The banking union is one of the key projects to improve the economy of the 17 countries sharing the euro. It would help eliminate many of the problems that now hold back the flow of credit needed to finance a euro zone economic recovery.

“In the euro area the foundations of economic and monetary union should be enhanced, including through an urgent movement towards banking union,” finance ministers and central bankers from the G20 leading economies said in a statement.

The EU has already made the first step – it agreed that the European Central Bank would take over the supervision of all banks in the euro zone from July 2014 in what is called the Single Supervisory Mechanism.

The next step is to agree how the euro zone will deal with closing down failed banks and how it will pay for that in the interim period before enough fees from the financial industry accrue to cover the potential expense.

The idea is to use the euro zone bailout fund, the European Stability Mechanism, to provide the necessary money for resolving failed banks in that period, but that means the use of euro zone taxpayers’ money.

The German government, which faces elections in September, believes that without a treaty change the potential use of German taxpayer money for winding down a bank in another euro zone state could give grounds to question it in the German constitutional court.

“The German government is willing to change the treaties: the sooner, the better,” German Finance Minister Wolfgang Schaeuble told reporters earlier on Friday.

“We should do what is necessary correctly, one must have the strength to do so,” he said. “The German government is strongly determined to go this way,” he said, adding there was a possibility the changes could be introduced through a simplified procedure to speed the process.

Such a procedure can be used to amend the EU law if the change does not transfer new powers to the European Union from the national level. It is not clear if establishing a euro zone mechanism to resolve failed banks would qualify as such.

While the simplified way shortens the time needed by eliminating some earlier government negotiations, the changed treaty still needs to be ratified by all national parliaments in the 27-nation bloc, and this is usually a lengthy process.

EU officials are also concerned that if the EU opens the possibility of treaty change, euro skeptic Britain would use the opportunity to demand to get back some of the powers already ceded to the union in exchange for its support.

(Editing by Andrea Ricci)

The long-term plan approved by Chancellor Angela Merkel’s cabinet is a testament to Germany’s economic strength during the euro zone debt crisis but underscores the deep divide in Europe, where many countries are still struggling to bring down swollen debt and deficits.

According to figures presented by Finance Minister Wolfgang Schaeuble and Economy Minister Philipp Roesler, net new borrowing would sink to 6.4 billion euros and Germany’s structural deficit would be totally eliminated in 2014.

From 2015, Germany would take on no new debt. The following year it would run a budget surplus of 5 billion euros.

“With all modesty, this is a result of historic proportions,” Roesler told reporters.

“The lesson from the sovereign debt crisis is that solid finances are essential. Thanks to this approach Germany is in the vanguard in Europe. Our success with a policy of growth-oriented consolidation is the envy of the world.”

Schaeuble used the news conference to push back against accusations Berlin has insisted on too much austerity in southern European countries like Greece and Spain, hailing the budget plan as proof that there was no contradiction between consolidation and growth.

The reality is less clearcut.

Germany has had success in bringing down its deficit not by reining in spending, which has stayed relatively stable at 300 billion euros since 2010, but because of soaring tax revenues – linked to strong growth and record low unemployment – and rock-bottom interest rates resulting from its safe-haven status during the crisis.

“We did have rising tax revenues, but we didn’t use them to increase spending,” Schaeuble said. “Low interest rates are a sign of confidence in the solidity of the German government. We don’t have to apologize for this.”

CONTRASTING FORTUNES

The German budget figures were presented a day before European Union leaders are due to meet in Brussels, with soaring unemployment and biting austerity at the top of the agenda.

Outside of Germany, the euro crisis has had a devastating impact, with 26 million people unemployed in the EU, including around one in every two young people in Greece, Spain and parts of Italy and Portugal.

In a sign of just how serious the situation has become, U.S. intelligence chief James Clapper took the unusual step of commenting on Europe’s problems in testimony to lawmakers in Washington on Tuesday, saying austerity posed a risk to social stability.

At the summit, leaders are expected to discuss budget polices, amid signs that France and Spain will be given more time to meet deficit-cutting goals.

In Germany, the economy has benefited from labor market reforms introduced a decade ago that have helped pushed the unemployment rate down to its lowest level since reunification in 1990.

But there are signs the crisis is taking its toll on the continent’s biggest economy. After growing by 4.2 percent in 2010 and 3.0 percent in 2011, German gross domestic product (GDP) increased by just 0.7 percent last year, weighed down by a sharp contraction in the fourth quarter.

Berlin is forecasting growth of just 0.4 percent this year, although Roesler described this on Wednesday as a “conservative” estimate.

(Writing by Noah Barkin; Editing by John Stonestreet)

Japan’s expansive policies, which have driven down the yen, escaped criticism in a statement agreed in Moscow by financial policymakers from the G20, which groups developed and emerging markets and accounts for 90 percent of the world economy.

After late-night talks, finance ministers and central bankers agreed on wording closer than expected to a joint statement issued last Tuesday by the Group of Seven rich nations backing market-determined exchange rates.

A draft communique seen by delegates on Friday had steered clear of the G7′s call for fiscal and monetary policy not to be targeted at exchange rates but the final version included a G20 commitment to refrain from competitive devaluations and stated monetary policy would be directed at price stability and growth.

“The language has been strengthened since our discussions last night,” Canadian Finance Minister Jim Flaherty told reporters. “It’s stronger than it was, but it was quite clear last night that everyone around the table wants to avoid any sort of currency disputes.”

The communique, seen by Reuters ahead of publication, did not single out Japan for aggressive monetary and fiscal policies that have seen the yen drop 20 percent.

The statement reflected a substantial, but not complete, endorsement of Tuesday’s statement by the G7 nations – the United States, Japan, Britain, Canada, France, Germany and Italy.

“We all agreed on the fact that we refuse to enter any currency war,” French Finance Minister Pierre Moscovici told reporters.

NO FISCAL TARGETS

The text also contained a commitment to credible medium-term fiscal strategy, but stopped short of setting specific goals.

A debt-cutting pact struck in Toronto in 2010 will expire this year if leaders fail to agree to extend it at a G20 summit of leaders in St Petersburg in September.

“Advanced economies will develop credible medium-term fiscal strategies … by the St. Petersburg summit,” the communique said.

The United States, which has resorted to massive monetary stimulus and higher government borrowing to drive growth and cut jobless queues, blocked a push from Europe to commit to reducing budget deficits.

Russian Finance Minister Anton Siluanov said the G20 had failed to reach agreement on medium-term budget deficit levels.

“We expect by April countries will have made progress on reaching a balanced approach to establishing new budget indicators on both, deficit and the level of government debt,” Siluanov said.

Russia, this year’s chair of the G20, also expressed concern about ultra-loose policies that it and other big emerging economies say could store up trouble for later.

Siluanov said a rebalancing of global growth required more than an adjustment of exchange rates.

“Structural reforms in all countries, either with a positive or negative balance of payments, should play a bigger role,” he said, adding that spillover effects of unconventional monetary policy, conducted by central banks in some countries, should be closely monitored.

The G20 put together a huge financial backstop to halt a market meltdown in 2009 but has failed to reach those heights since. At successive meetings, Germany has pressed the United States and others to do more to tackle their debts. Washington in turn has urged Berlin to do more to increase demand.

On currencies, the G20 text reiterated its commitment last November, to move towards “exchange rate flexibility to reflect underlying fundamentals and avoid persistent exchange rate misalignments”.

“The G7 made a very clear statement this week. I think you’ll see the G20 echo what was said, and say that currencies should not be used as a tool of competitive devaluation,” Britain’s finance minister, George Osborne, said in Moscow.

“Countries shouldn’t make the mistake of the past of using currencies as a tool of economic warfare.”

(Additional reporting by Randall Palmer, Lesley Wroughton, Tetsushi Kajimoto, Jan Strupczewski, Lidia Kelly and Jason Bush. Writing by Douglas Busvine. Editing by Timothy Heritage/Mike Peacock)

The G20 forum, which put together a huge financial backstop
to halt a market meltdown in 2009, is back in the spotlight
after a week in which the Group of Seven rich nations tried, and
spectacularly failed, to speak on currencies with one voice.

The G7 has long been the powerhouse of financial diplomacy.
But tension between Washington and Tokyo has risen over new
Prime Minister Shinzo Abe’s bid to end two decades of deflation.

The G7 issued a joint statement on Tuesday reaffirming “our
longstanding commitment to market determined exchange rates”.
Yet the show of unity was quickly undermined by off-the-record
briefings critical of Japan.

Hosts Russia say the G20 – which includes leading emerging
markets and accounts for 90 percent of the world economy – will
back the thrust of the G7 text when they issue their communique
on Saturday.

Russia’s finance “sherpa”, Deputy Finance Minister Sergei
Storchak, said the drafting discussion was proving “difficult”,
but the final text would not single out Japan for criticism.

“There is no competitive devaluation, there are no currency
wars,” Storchak told reporters. “What’s happening is market
reaction to exclusively internal decision making.”

When the G20 last met in November, its statement contained a
call to “refrain from competitive devaluation of currencies”
that was omitted by the G7 this week in what Tokyo took to mean
its policies had won a free pass.

“As the G20 meeting in Moscow gets underway, the battle
lines are drawn – it isn’t ‘G6 against Japan’ as much as it is
‘G7 against G13′,” French bank Societe Generale wrote in a note.

The United States, G20 delegation sources said, was blocking
attempts to agree on a commitment to cut borrowing to replace a
collective pledge to halve budget deficits agreed at the G20
Toronto summit in 2010. The so-called Toronto goal expires this
year.

The euro zone’s largest economy, Germany, and the European
Central Bank, want a new borrowing pledge – in line with their
own tough medicine for the currency bloc’s ailing periphery.

BACK TO THE ’80S

The maneouvring on currencies is reminiscent of the 1980s,
when the Plaza and Louvre accords sought to manage first the
excessive strengthening, and then weakening, of the U.S. dollar.

But, with the collapse of communism in eastern Europe and
China’s adoption of its own brand of capitalism, the world has
changed. Emerging markets, as exporters and reserve holders, now
demand a greater say in global financial management.

One senior G20 source said late on Thursday that there would
be no separate statement on currencies. A passage would be
inserted into the main communique, but it would not repeat the
G7 line that “we will not target exchange rates”.

This, the source said, would not be acceptable to China -
which is now the world’s second-largest economy and holds much
of its $3.3 trillion in foreign reserves in U.S. Treasury bonds.

DEFLATION, REFLATION

Japan’s embrace of ‘Abenomics’ entails a huge round of
fiscal and monetary expansion aimed at raising the inflation
rate to 2 percent.

The yen has fallen by around 20 percent since November,
triggering a rally in Japanese stocks that, the government
hopes, will kick-start growth by encouraging savers to spend and
companies to invest.

With the United States, Britain and euro zone all running
ultra-loose monetary policies, some emerging market exporters
have sounded the alarm over ‘currency wars’ that they say will
devalue their foreign reserves and hit their competitiveness.

But not all: Mexico’s central bank governor Agustin Carstens
said that while he backed the G7′s commitment to market driven
exchange rates, it was important to refrain from rash rhetoric.

“If we enter into a real currency war what will end up
happening is adding a lot of volatility to markets, pushing up
risk premiums and no one would end up winning,” Carstens said.

Russian officials note that Japan has not intervened on
currency markets to weaken the yen, suggesting that Tokyo would
not be singled out as a miscreant.

Before flying to Moscow, Bank of Japan Governor Masaaki
Shirakawa defended the monetary expansion, saying it was aimed
at reviving the economy – which shrank in the fourth quarter -
and not at weakening the yen.

“The BOJ is conducting monetary policy to achieve stability
in Japan’s economy. It will continue to do so,” he said.

The G20 forum, which put together a huge financial backstop to halt a market meltdown in 2009, is back in the spotlight after a week in which the Group of Seven rich nations tried, and spectacularly failed, to speak on currencies with one voice.

The G7 has long been the powerhouse of financial diplomacy. But tension between Washington and Tokyo has risen over new Prime Minister Shinzo Abe’s bid to end two decades of deflation.

The G7 issued a joint statement on Tuesday reaffirming “our longstanding commitment to market determined exchange rates”. Yet the show of unity was quickly undermined by off-the-record briefings critical of Japan.

Hosts Russia say the G20 – which includes leading emerging markets and accounts for 90 percent of the world economy – will back the thrust of the G7 text when they issue their communique on Saturday. But not necessarily word for word.

“The language may differ (from the G7), but the intent will remain the same,” Finance Minister Anton Siluanov told Reuters.

When the G20 last met in November, its statement contained a call to “refrain from competitive devaluation of currencies” that was omitted by the G7 this week in what Tokyo took to mean its policies had won a free pass.

“As the G20 meeting in Moscow gets underway, the battle lines are drawn – it isn’t ‘G6 against Japan’ as much as it is ‘G7 against G13′,” French bank Societe Generale wrote in a note.

BACK TO THE ’80S

The maneuvering on currencies is reminiscent of the 1980s, when the Plaza and Louvre accords sought to manage first the excessive strengthening, and then weakening, of the U.S. dollar.

But, with the collapse of communism in eastern Europe and China’s adoption of its own brand of capitalism, the world has changed. Emerging markets, as exporters and reserve holders, now demand a greater say in global financial management.

One senior G20 source said there would be no separate statement on currencies. A passage would be inserted into the main communique, but it would not repeat the G7 line that “we will not target exchange rates”.

This, the source said, would not be acceptable to China – which is now the world’s second-largest economy and holds much of its $3.3 trillion in foreign reserves in U.S. Treasury bonds.

As Russia tries to push its own supply-side agenda, the austerity versus growth debate will also complicate talks on renewing a goal set at the G20 summit in Toronto in 2010 of halving budget deficits within three years.

Here, the euro zone’s largest economy, Germany, and the European Central Bank, are pushing for fresh commitments to curb borrowing – in line with their own tough medicine for the currency bloc’s ailing periphery.

The United States, where the Federal Reserve has vowed to keep monetary policy loose until unemployment comes down, is opposed. Russia, which runs a balanced budget and has low debts, has yet to show its hand in the debate.

DEFLATION, REFLATION

Japan’s embrace of ‘Abenomics’ entails a huge round of fiscal and monetary expansion aimed at raising the inflation rate to 2 percent.

The yen has fallen by around 20 percent since November, triggering a rally in Japanese stocks that, the government hopes, will kick-start growth by encouraging savers to spend and companies to invest.

With the United States, Britain and euro zone all running ultra-loose monetary policies, some emerging market exporters have sounded the alarm over ‘currency wars’ that they say will devalue their foreign reserves and hit their competitiveness.

But not all: Mexico’s central bank governor Agustin Carstens said that while he backed the G7′s commitment to market driven exchange rates, it was important to refrain from rash rhetoric.

“If we enter into a real currency war what will end up happening is adding a lot of volatility to markets, pushing up risk premiums and no one would end up winning,” Carstens said.

Russian officials note that Japan has not intervened on currency markets to weaken the yen, suggesting that Tokyo would not be singled out as a miscreant.

Before flying to Moscow, Bank of Japan Governor Masaaki Shirakawa defended the monetary expansion, saying it was aimed at reviving the economy – which shrank in the fourth quarter – and not at weakening the yen.

“The BOJ is conducting monetary policy to achieve stability in Japan’s economy. It will continue to do so,” he said.

(Additional reporting by Lesley Wroughton, Lidia Kelly and Katya Golubkova in Moscow, Leika Kihara and Kaori Kaneko in Tokyo, and Krista Hughes and Michael O’Boyle in Mexico City; Writing by Douglas Busvine)

“I’m expecting that we won’t experience recession in Germany next year and the economy will once again grow at similar levels as this year,” Hundt said.

The German economy has so far managed to fend off the euro zone’s troubles, expanding by 4.2 percent in 2010 and 3 percent last year.

The country’s gross domestic product in 2012 is expected to grow by about 0.9 percent. In 2013, private economists have forecast GDP to increase by about 0.7 percent, down from mid-2012 predictions of 1.3 percent.

Hundt also said that he was concerned about high wage demands in Germany in 2013 after workers got big increases in 2012 thanks in part to intervention by Chancellor Angela Merkel and members of her cabinet.

Even though unions are calling for big increases again in 2013, Hundt said he was confident wage deals would be moderate.

He said he expected the wage negotiators would continue their flexible policies that differentiated between sectors doing well and others that were struggling.

He was optimistic the unions would factor in the slight economic weakening in Germany this year into their demands.

(Reporting By Gernot Heller; writing by Erik Kirschbaum. Editing by Jane Merriman)

The sale completes the privatisation of state-owned real
estate firm TLG Immobilien, after the government sold its
residential properties to real estate group TAG Immobilien
last month for nearly 500 million euros.

“From the government’s point of view, the current market
situation was perfect for the sale of TLG,” Finance Minster
Wolfgang Schaeuble said.

The size of the combined TLG sale eclipsed the previous
record for the year, the 1.4 billion euro acquisition of 22,000
flats by a group led by Patrizia Immobilien from
public-sector bank LBBW in February.

Around 800 million euros in proceeds from TLG will flow into
government coffers next year. The remainder comprises debt taken
on by the new owners, TAG and Lone Star.

“The proceeds are good from the taxpayer point of view,”
Schaeuble said, adding that Berlin was left with no financing
risks.

The finance ministry said Lone Star wanted to continue the
business and strategically develop its portfolio.

TLG Immobilien has properties primarily in or near eastern
German cities like Berlin or Leipzig. It generated revenues of
237 million euros and an operating profit of 83 million last
year.

It was one of many companies meant to be sold or
restructured by the government after the collapse of communist
East Germany.

Industry observers expect Lone Star to quickly clean up the
portfolio by selling off many of the properties.

Lone Star already has a significant presence in Germany,
with investments in financial houses IKB, DHB
and Corealcredit.

Reuters reported in October that TAG and Lone Star were
likely to beat other bidders in the TLG sale.
($1 = 0.7693 euros)

(Writing by Madeline Chambers, Gareth Jones and Jonathan Gould;
Editing by David Cowell)

The Airbus parent company said it was in talks on the company’s ownership with France, German and Spain, confirming press reports.

People familiar with the matter said the talks involved a sweeping re-arrangement of government stakes, coupled with a staged exit of its industrial partners, reducing big shareholder blocks below 30 percent instead of more than 50 percent.

“The company is participating actively in such discussions … with the objective to preserve and enhance … the interests of all stakeholders,” EADS said in a statement.

A German economy ministry spokesman added on Monday efforts were being made to reach a deal as quickly as possible.

Shares in the Franco-German-led group rose over 2 percent as investors warmed to the promise of greater clarity over its shareholder structure, even though it may mean an overhang of stock ready to be sold by industrial groups in the short term.

EADS has been controlled by a combination of the French state and industrial partners in France and Germany since it was founded in 2000 as a European counterweight to Boeing Co.

But the system has come under strain as the core industrial shareholders – German car maker Daimler AG and French media group Lagardere SA – pledged to focus on their core activities.

Germany has meanwhile stepped forward to buy some of Daimler’s shares in a surprise reversal of a previously non-interventionist policy towards major industries, raising concerns of growing political interference in EADS.

EADS’ ownership structure has also become an urgent issue since $45 billion merger talks with UK arms firm BAE Systems Plc collapsed in October, exposing the fragility of its existing shareholder structure.

“The BAE discussions caused a lot of movement and demonstrated to people like Lagardere that they could find a way out,” said a person familiar with the discussions.

France and Germany are expected to hold 12 percent each in the company, joined by Spain on around 4 percent and keeping he combined voting bloc below a 30 percent legal threshold.

Negotiators are attempting to choreograph a sequence of moves designed to consolidate state shareholdings while letting industrial partners out of EADS without hurting its share price, which has risen 7 percent this year on robust jetliner sales.

Germany will build its stake by buying 7.5 percent from a bank consortium, whose shares are under Daimler’s voting control, and 4.5 percent from Daimler which will part separately with a further 3 percent, sources close to the talks said.

That will leave Lagardere and Daimler with a further 7.5 percent each left to sell, but cash-rich EADS will announce a share buyback at the next shareholder meeting to help mop up excess stock and defend its share price, the sources said.

SHAREHOLDER MEETING

French Chairman Arnaud Lagardere is expected to remain in his post until a shareholder meeting in the spring, which is likely to bring in a mainly independent board led by a new chairman, the sources said.

EADS declined to comment.

Germany has not been a direct shareholder before, with 22.5 percent of voting rights instead held by Daimler. On the French side, the state owns 15 percent, with 7.5 percent held by media group Lagardere. Spain owns 5.5 percent.

A German consortium called Dedalus, made up of private financial institutes and public sector owners including state controlled bank KfW, holds a 7.5 percent stake in EADS but the voting rights are part of those controlled by Daimler.

EADS is due to hold an investor meeting on Monday.

“The currently discussed potential changes are likely to require the approval of EADS NV shareholders and there can be no certainty that these discussions will be conclusive,” EADS said.

Shares in EADS were 2.5 percent higher at 26.535 euros by 5:17 a.m. EDT, among the top gainers on France’s blue-chip CAC 40 index. The stock is up 8.8 percent in the last four days.

Two sources familiar with the discussions said on Sunday that a deal could be reached by Monday.

A source in Germany said a share buyback by EADS was also possible to reduce the share overhang.

Under Dutch law that governs EADS, a group of shareholders cannot control more than 30 percent of the votes without triggering a mandatory bid for the whole company.

Reuters reported on Friday that France and Germany were close to a deal to shake up EADS after France agreed to hive off part of its 15 percent stake to preserve parity with Germany inside a core government shareholder group.

Under this arrangement, France is expected to place 3 percent in a non-voting structure in the Netherlands, where EADS is registered, while keeping economic control of the stock.

A potential mismatch of shareholdings had been a key stumbling block in the talks.

A German newspaper report said talks were also looking at what level of state representation there could be on the company’s board, with suggestions of two places each for France and Germany and one for Spain.

The new arrangement is due to be put to shareholders in the spring of 2013, the newspaper said.

(Additional reporting by Alexandra Hudson in Berlin, with Alexander Huebner and Ed Taylor in Frankfurt, Emmanuel Jarry and James Regan in Paris, Michael Shields in Vienna; Editing by Blaise Robinson and David Holmes)

Meeting a day before the U.S. presidential election, which is being disputed largely on tax and spending issues, the Group of 20 countries worried that previous commitments to cut in half the budget shortfalls of advanced economies by the end of next year might hurt the struggling global economy.

“In light of the weak pace of global growth, they will ensure that the pace of fiscal consolidation is appropriate to support the recovery,” G20 policymakers said in a communique after a two-day meeting in Mexico.

The target for cutting deficits was agreed at a summit in Toronto in 2010, when the global economy seemed to have gotten past the devastating financial crisis of the previous two years.

It now looks out of reach for some economies, including the United States, as growth has slowed.

“The objective is for 2013 and there is a slight tendency to overshoot,” said Christine Lagarde, the International Monetary Fund’s managing director. She noted the language on fiscal issues “has evolved” and took account of situations in different countries.

While the United States needs to bring its deficits under control — its budget gap surpassed $1 trillion for the fourth year in a row in fiscal 2012 — many G20 countries are more worried about a barrage of tax hikes and spending cuts due to take effect from January 1.

They were penciled in last year to show Washington could tackle its deep budget problems. But the so-called “fiscal cliff” could tip the U.S. economy back into recession next year, and hurt world output, unless Congress cuts a deal quickly after the presidential and congressional elections on Tuesday.

TIPPING POINT FEARS

Chile’s finance minister, Felipe Larrain, said there was an assumption a U.S. deal would be done. “If we’re not able to resolve the cliff, that could be the tipping point for a much more complicated scenario in the world economy,” he told Reuters.

The G20 communique said the United States “will carefully calibrate the pace of fiscal tightening to ensure that public finances are placed on a sustainable long-run path while avoiding a sharp fiscal contraction in 2013.”

In a bid to show their commitment to controlling their finances over the long term, advanced G20 countries will come up with “credible and ambitious” debt targets for beyond 2016, the existing target for them to stabilize their debt. Those new targets will be discussed by G20 leaders next year.

Alan Ruskin, global head of G10 FX strategy at Deutsche Bank in New York, said the policymakers seemed to want to show they were serious about their long-term fiscal rigor while easing off a bit on austerity for now.

“The U.S. is putting out a message that it wants to be credible in the long term but in the short term it believes growth will do more good,” he said.

One idea discussed in Mexico City was to focus more on the so-called structural deficits of countries with budget problems that could exclude the costs of recession, such as higher unemployment and welfare costs and lower tax revenues.

The IMF’s Lagarde said budget tightening should be “structurally targeted rather than fixated on nominal targets.”

Germany maintained its insistence that austerity is the best way to restore confidence and underpin long-term growth.

“A reduction of excessive public debt is unavoidable for sustained growth,” German Finance Minister Wolfgang Schaeuble said, noting Germany was hitting its deficit targets. “With all due modesty, we would urge others to meet their own obligations.”

ELEVATED RISKS STILL FOR WORLD ECONOMY

The G20′s consensus of four years ago, which helped stave off the risk of a new depression, has given way to persistent differences over issues such as spending to boost growth and the right pace of belt-tightening to tackle high debt levels.

The global economy still faces “elevated” risks, including Europe’s debt crisis – centered on Spain and Greece – and potential problems in Japan, the communique said.

“Global growth remains modest and downside risks are still elevated,” the communique said, pointing also to possible delays in implementing policy announcements in Europe, securing funding for this year’s budget in Japan, and weaker growth in some emerging markets.

The wording on Europe referred to differences within the euro zone over how to build a banking union to bolster its shaky financial system, during 2013.

The G20 also recommitted to implementing tough new bank capital rules on time. The rules, known as Basel III, are the world’s response to the financial crisis and are set to be phased in starting in January.

Regulators in the United States and Europe, home to many of the world’s largest banks, have not yet finalized their versions of the rules. That had prompted speculation that the timetable could be pushed forward.

Few expected major agreements in Mexico with heavyweights such as U.S. Treasury Secretary Timothy Geithner, European Central Bank chief Mario Draghi and top Chinese officials all skipping the meeting. Geithner is expected to stand down after the U.S. election, even if President Barack Obama is re-elected.

(Additional reporting by the G20 team in Mexico City; Writing by William Schomberg; Editing by Kieran Murray, Chizu Nomiyama and Leslie Adler)