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G20 need exit strategy, stimulus to stay now: UK source

G20 countries should ensure they have plans to withdraw the huge stimuli put into their economies but are clear the fiscal and monetary boosts remain in place for now, a UK government source told Reuters on Wednesday.
/ Source: Reuters

G20 countries should ensure they have plans to withdraw the huge stimuli put into their economies but are clear the fiscal and monetary boosts remain in place for now, a UK government source told Reuters on Wednesday.

"It is vital that countries have an exit strategy but we are very clear that interventions need to remain in place for as long as needed," the source said ahead of a meeting of Group of 20 finance ministers and central bankers in London next week.

"The meeting will emphasize the significant progress that has been made but make it clear that more has to be done."

G20 countries have cut interest rates to exceptionally low levels and thrown billions of dollars at their economies in order to fight the worst synchronized global downturn in decades.

The source said there was also expected to be some discussion on bankers' pay at the September 4/5 meeting.

"It can't be return to the old ways of high risk behavior by financial institutions," the source said.

French President Nicolas Sarkozy announced new limits on bonus payments to bank traders on Tuesday and said he would press his G20 partners to adopt the same standards as Paris.

He said banks would have to defer two-thirds of bonus payments over three years and make a third of the payout in stock, in order to discourage short-termism that many blame for the recent financial crisis.

Sarkozy said the French government would not work with banks that did not follow its rules and that the G20 would consider setting upper limits on bonus payments or setting a global tax.

The UK Treasury said British finance minister Alistair Darling had already made clear that short-term bonus culture would have to change and that the issue would be raised at the next week's ministerial meeting which London is hosting. (Reporting by Sumeet Desai; editing by Mike Peacock)