At their summit in Toronto over the weekend, the leaders of the G20 warned that economic recovery is not assured, but that some countries have to pursue fiscal belt-tightening nonetheless. Certain financial sector reforms, such as bank taxes, aren’t to be adopted uniformly either.

“While growth is returning, the recovery is uneven and fragile, unemployment in many countries remains at unacceptable levels, and the social impact of the crisis is still widely felt,” they noted in the final communique. “To sustain recovery, we need to follow through on delivering existing stimulus plans, while working to create the conditions for robust private demand.”

However, while they stressed that the global economy still needs fiscal and monetary policy support, they also allowed that sovereign debt as become a bigger worry in some nations, “recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, properly phased and growth-friendly plans to deliver fiscal sustainability, differentiated for and tailored to national circumstances.”

Unlike the synchronized efforts to spur the economy, the G20 members concede that nations must follow their own timetables in their fiscal consolidation efforts. “Those countries with serious fiscal challenges need to accelerate the pace of consolidation. This should be combined with efforts to rebalance global demand to help ensure global growth continues on a sustainable path,” they said, adding that, “Further progress is also required on financial repair and reform to increase the transparency and strengthen the balance sheets of our financial institutions, and support credit availability and rapid growth, including in the real economy.”

The advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016, they said.

In terms of financial sector reform, they agreed that new bank capital standards will also be phased in by the end of 2012, pledged to implement measures to improve transparency and regulatory oversight of hedge funds, credit rating agencies and over-the-counter derivatives, and stressed the importance of global accounting standards.

They also called on the Financial Stability Board and the IMF to report to finance ministers and central bank governors by October on recommendations to strengthen oversight and supervision. And they asked the FSB to develop policy recommendations to deal with problems associated with handling the failure of systemically important financial institutions by the Seoul Summit. “To reduce moral hazard risks, there is a need to have a policy framework including effective resolution tools, strengthened prudential and supervisory requirements, and core financial market infrastructures,” they said, and, while they agreed the financial sector should help pay for “any burdens associated with government interventions”, but didn’t agree on a bank tax or an alternative to be adopted globally.

Additionally, the pledged to continue resisting protectionism, and promised that, until the end of 2013, they will refrain from raising, or imposing new, trade barriers.

IE