Meeting at President Obama's Camp David retreat, the G8 club of developed nations have focussed their discussions on growth and fiscal reforms.
G8 host President Barack Obama declared the group “absolutely committed” to growth and fiscal reforms Saturday as leaders of the world’s major economies tried to bridge divisions over the eurozone’s deepening crisis.
With the future of Europe’s currency union in doubt, Obama stressed the need for policies that would span competing demands for growth-friendly spending and German-backed budget cuts.
“All of us are absolutely committed to making sure that both growth and stability, and fiscal consolidation, are a part of an overall package,” Obama said, while flanked by G8 leaders at his Camp David rural retreat.
The ‘all-of-the-above’ approach masks deep divisions within the G8, that have seen the United States support French efforts to up end two years of Berlin-led austerity-first policies.
Critics say the existing single-minded focus on cutting Europe’s sky-high debt has fuelled rampant unemployment, brought Greece to the verge of bankruptcy and deepened crises in Italy and Spain.
The coming weeks will tell if the G8’s new 30 000-foot view of mutually compatible austerity and stimulus survives contact with events on the ground.
Greece may be the first test after the clobbering in recent elections of pro-austerity parties left a cash-for-reforms deal between Athens and the rest of Europe on life support.
Fresh Greek polls are scheduled for June 17, but amid widespread public anger there is no certainty that supporters of the painful reforms will win.
That would leave G8 members with a tough choice: loosen demands on Greece by backing more pro-growth policies, or stop assistance.
Financial markets are already betting that if anti-austerity parties win again, Germany will turn off the bailout tap, a decision that would likely force a Greek default and exit from the eurozone.
The prospect of Greece’s eurozone exit—which could have steep repercussions for the US economy and perhaps his chances of re-election—had spurred Obama to wade neck-deep into European political waters.
There he risked the ire of his guest and Europe’s paymaster German Chancellor Angela Merkel, who has demanded reforms to assuage stiff domestic opposition to repeated taxpayer-funded bailouts.
The tension between the Obama and Merkel was evident Friday when a dressed-down president greeted G8 leaders at his cabin for an informal dinner that would last more than two hours.
Obama welcomed Merkel with a cordial: “How’ve you been?”
When her response came: a shrug and pursed lips, Obama conceded: “Well, you have a few things on your mind.”
Looking to the longer-term, discussion is stirring about the need for specific stimulus spending funded by common European bonds—a measure some say would satisfy the need for austerity and stimulus.
“We need to compliment the fiscal consolidation efforts for reforms with investment,” European Commission chief Jose Manuel Barroso told Agence France-Presse (AFP) ahead of the summit.
But according to one senior European politician not taking part in the discussions at Camp David, finding projects that could quickly stimulate the Greek or other economies may not be easy, and the plan may yet be overtaken by events.
Greek and Spanish citizens have been pulling cash from their bank accounts, risking a fully-fledged bank run.
Serious about Syria
Friday night’s discussions at Camp David’s rustic collection of cabins in the wooded Catoctin Mountains in Maryland focused heavily the on-going bloodshed in Syria.
Obama said Saturday the G8 agreed that the political process in Syria should move forward “in a more timely fashion.”
“We had a discussion about Syria, we all believe that a peaceful resolution and a political transition in Syria is preferable.”
But as the UN weighs sending more military observers to the country, it was not clear whether Russia and the rest of the G8 had bridged differences over the fate of Syrian President Bashar al-Assad’s regime.
There was also broad G8 agreement about how to tackle upcoming talks with Iran.
Obama said world powers were “hopeful” about the talks in Baghdad on Wednesday, emphasizing that the leaders agreed on how to tackle the crisis, in an implicit contrast to Iran’s deepening isolation.
Diplomats said the weekend would also see agreement on how to help newly free Arab nations recover state assets moved abroad by members of previous regimes.
The G8 club of developed nations includes Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.—AFP