By JANE WARDELL and AOIFE WHITE
LONDON -- Top finance officials from rich and developing countries agreed Saturday to curb hefty bankers' bonuses, but the proposed crackdown on excessive payouts so far falls short of European demands after the U.S. and Britain shied away from imposing a cap.
The Group of 20 finance ministers also pledged to maintain stimulus measures such as extra government spending and low interest rates to boost the global economy, warning that the fledgling recovery that provided the backdrop to their meeting here is by no means assured.
"The financial system is showing signs of repair," said U.S. Treasury Secretary Timothy Geithner. "Growth is now under way. However, we still face significant challenges ahead."
The G-20 joint statement issued at the end of their London meeting stated that fiscal and monetary policy would stay "expansionary" for as long as needed to reduce the chances of a double-dip recession.
The International Monetary Fund has said the global economy is beginning a sluggish recovery from its worst recession since World War II, raising its estimate for global economic growth in 2010 to 2.5 percent, from an April projection of 1.9 percent.
But the IMF also downgraded its forecast for this year, saying it would shrink by 1.4 percent, instead of 1.3 percent.
The group also pushed ahead with plans to reform the financial system, including tougher action against tax havens and giving developing countries a greater say in global governance.
French Finance Minister Christine Lagarde said this ensured that "things will not go back to business as usual ... that there are no dark areas anymore to hide."
But while the gathering -- a preparatory session for the G-20 leaders' summit in Pittsburgh later this month -- reached agreement on the need for ongoing growth-boosting measures and some regulatory reform, it compromised on the hot topic of bankers' bonuses.
British Treasury chief and meeting host Alistair Darling said that there must be no more cases in which "people are being rewarded for reckless behavior."
Heading into the talks in the British capital, European countries had pushed for the G-20, which represents 80 percent of the world's economic output, to enforce an official cap on both individual payouts and collective bonus pots at financial institutions.
The G-20 agreed to give the Financial Stability Board, an international body established at the London Summit of G-20 leaders in April, the task of drawing up practical proposals that the Sept. 24-25 leaders meeting in Pittsburgh could agree on.
The G-20 communique failed to directly address a proposal from Geithner for a new international accord to increase banks' capital reserves, but he said he was encouraged by "support around the room."
"Capital is critical" as a shock absorber to cover potential loan losses, Geithner said.
The communique did not directly address that plan but called for rapid progress in developing stronger regulation, including a requirement that banks hold more and better capital once recovery is assured.
Geithner also stressed the need for discussions on a so-called exit strategy to withdraw government support for the economy and pay off trillions of dollars in debt, saying a recovery strategy would not be effective "unless we can make fully credible our commitment to reverse those actions as soon as conditions permit."
German Finance Minister Peer Steinbrueck, who has been openly critical of the government debt being loaded up by big spending policies, went further, saying that it was essential to start drawing up exit plans now.
"It makes sense to think ... how can we avoid the next crisis which might be caused by a policy of very cheap money, a huge amount of liquidity and an overstretching of our state aid budgets," he said.
British Prime Minister Gordon Brown won support for his push to take tougher action against tax havens, with the G-20 agreeing to a March 2010 deadline to start sanctions against tax havens which refuse to comply with new transparency rules agreed at the April G-20 leaders' summit in London.