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Prime Minister Stephen Harper has hailed an agreement among G20 leaders at the close of their Toronto summit on a Canadian-led plan for industrialized nations to slash their deficits in half within three years.

Speaking with reporters on Sunday after the G20 released its final summit communiqué, Harper said he expects Canada will halve its deficit and put its debt load on a stable or downward path by next year.

In the communiqué, the G20 leaders gave each other plenty of leeway in meeting the deficit reduction targets and warned that too drastic cuts could spark another global economic meltdown similar to last year's crisis.

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U.S. President Barack Obama, left, talks with Prime Minister Stephen Harper during the opening plenary session of the G20 summit in Toronto on Sunday. ((Jason Reed/Associated Press))

Harper said the leaders came to Toronto amid growing concerns of swelling deficits, but recognized the need for fiscal consolidation "is not an end in itself. "

"The G20 still has a lot to do to fully entrench the global recovery, but these are important steps forward and, as you know, they are steps that Canada was seeking," he said.

While he insisted the G20 leaders have a common goal of strengthening the world's economy, the prime minister acknowledged that "everything is voluntary" in the statement.

Speaking shortly after Harper, U.S. President Barack Obama committed his country to the G20's goal of cutting the country's deficit in half by 2013, despite previously warning other leaders that turning off the stimulus taps too quickly could choke off the fragile economic recovery.

"We have to make sure we're not rushing too quickly to the exits and all at the same time," Obama said. "Our fiscal health tomorrow will rest in no small measure on our ability to create jobs today."

The president also said that all G20 leaders agreed to build a global framework for banking regulations and want it to ready by the next G20 meeting in the South Korean capital Seoul in November.

Security costs defended amid fresh standoffs

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Riders are turned off a street by police in riot gear as they take part in a "critical mass" bicycle demonstration against the G20 summit on Sunday in downtown Toronto. ((Mike Segar/Reuters))

As leaders concluded their talks safely behind the barricades of the security zone in Toronto's downtown core, police and anti-G20 protesters engaged in tense — and at times violent — confrontations and standoffs in several parts of Toronto for a second day.

Police in full riot gear continued to arrest several protesters well into Sunday evening at the major intersection of Queen Street and Spadina Avenue, just blocks away from the summit site.

During his closing remarks, Harper deplored the "actions of a few thugs," saying the weekend's violence goes a long way to explain why security costs are so high at this week's dual G8 and G20 gatherings.

The Conservative government has faced heavy criticism for the estimated price tag for security at the two summits, which is expected to exceed $1 billion.

But Harper defended the need for Canada's hosting the back-to-back summits, saying they are inextricably linked with the country's economic health. 

"As I constantly remind Canadians, there isn't really a Canadian economy anymore; it's a global economy," he said.

"And, yes, the Canadian economy so to speak is doing better than many other countries. But the general trajectory of the Canadian economy — whether we're on the downhill as we were last year or on the rebound as we are this year — is fundamentally determined by the state of the global economy, and that's what these meetings are all about."

But opposition critics condemned the prime minister's handling of the summit agenda, saying he failed to make issues such as climate change a priority.

Documents obtained by The Canadian Press show Harper rejected advice from his own officials to take the lead and eliminate tax incentives for the oil patch. Instead, the prime minister opted to reiterate actions taken in the past rather than volunteer any additional gestures.

"Harper says we must recognize we are in a global economy, yet he undermined progress on global solutions for climate and finance reform," NDP MP Paul Dewar said Sunday on Twitter during Harper's news conference.

Statement allows for 'tailored' policies

The communiqué recognizes that not all countries are in the same position, which means the policies could be "tailored" to each country's circumstances. The G20 has given greater latitude to Japan to repay its deficit and debt.

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"Serious challenges remain," the leaders said in the closing statement released as Harper spoke Sunday.

"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."

U.K. PM: 'tightening process needs to start now'

Some European countries, including Britain, are more concerned with avoiding a financial crisis brought on by too much government spending. Those countries cited the trouble facing Greece earlier this year, when it had to be bailed out because it was close to running out of money.

"Countries with large deficits, the tightening process needs to start now," British Prime Minister David Cameron told reporters in his closing news conference.

As anticipated, a proposed bank tax — a measure vehemently opposed by the Canadian government — was not included in the final communiqué.

Instead, the G20 statement said countries can decide on their own whether to pursue a financial levy or follow "other options."

In his remarks ahead of Harper's speech, French President Nicolas Sarkozy took a different view of the final statement's verdict and called on Europe to "show the way for the bank tax."

"It's difficult to have everybody go in the same direction," he said. "But at least it has been accepted."

With files from The Canadian Press