Tags: G | 8 | Summit

G-8 Leaders Focus on Preventing Eurozone Calamity

Saturday, 19 May 2012 07:34 AM

 

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The United States and other members of the Group of Eight industrial nations agree that Europe's financial crisis must be addressed with a mix of growth and austerity measures, President Barack Obama said Saturday as leaders gathered for a shirt-sleeve discussion that also will cover world concerns about ups and downs in oil prices.

"All of us are absolutely committed to making sure that growth and stability and fiscal consolidation are part of an overall package," Obama said as he and other leaders gathered in a rustic cabin at this wooded presidential retreat.

Obama was referring to the debt crises in Greece and Spain, primarily, although he was not specific in brief remarks to reporters.

Leaders of the United States, Germany, France, Canada, Italy, Britain, Russia, and Japan are trying to figure out how to tame Europe's debt crisis while also increasing the demand for goods and spurring job growth.

Obama's argument for additional stimulus measures alongside belt-tightening is primarily aimed at Germany, the strongest member of the union that uses the common Euro currency, although Obama did not say so. German Chancellor Angela Merkel was seated a few places away at a small round table.

Leaders of the world's economic powers say Germany should balance its push for European fiscal austerity with doses of stimulus spending to avoid a financial calamity with global repercussions.

In talks Saturday, the leaders were looking to build consensus even though a decisive plan of action seemed out of reach for now.

"We'll also be talking about uncertainty in the energy markets and how to resolve some of those issues," Obama said at the start of discussions on the global economy.

Obama chose the secluded Camp David setting in part to give leaders a chance for a freewheeling discussion out of sight of most media and far from the raucous protests that have accompanied previous meetings of the G-8.

The G-8 session sets the stage for a far more consequential European summit next week where the countries that share the euro as their currency hope to come together on specific steps to fight rising debt while spurring a recovery.

Obama established the tone for the G-8 on Friday after meeting with just-elected French President Francois Hollande, when he said the aim of the summit was to promote both fiscal consolidation and a "strong growth agenda."

The two leaders, Obama said "agree that this is an issue of extraordinary importance not only to the people of Europe but also to the world economy."

In a hint of the pressures facing the leaders, when Obama greeted Merkel and asked her how she was doing, the German leader only shrugged.

"Well, you have a few things on your mind," Obama said.

A central economic topic, though hardly the only one confronting Europe, is the fate of Greece. That country is facing the most acute financial crisis of the eurozone and is set to hold elections June 17 to end political deadlock. At issue is whether Greece abandons the euro to escape austerity measures.

Hollande, after meeting with Obama at the White House, said, "We share the same views, the fact that Greece must stay in the eurozone and that all of us must do what we can to that effect."

For Obama, Europe's fate is critical to his own political survival. An economic recession that spreads to the U.S. could damage an already slow recovery and boost the argument by his Republican challenger, Mitt Romney, that the United States economy needs new leadership.

There is a get-acquainted aspect to the session as well.

The Camp David gathering, the largest collection of foreign leaders ever at the presidential retreat, is the first G-8 meeting for Hollande, for Italian Prime Minister Mario Monti and for Japanese Prime Minister Yoshihiko Noda. In what has been widely viewed as a snub, Russian President Vladimir Putin is skipping the G-8. He sent Prime Minister Dmitry Medvedev in his place.

The meeting comes at a turning point in Europe.

Elections in France and Greece have signaled defiance toward the fiscal austerity measures that Merkel has pushed for the most indebted eurozone countries. European countries are straining under high borrowing rates. The drastic cuts in spending and government layoffs were designed to address massive national debts but they have also caused short-term economic distress and joblessness.

On Friday, Spain's central bank announced that the level of bad loans on the books of Spanish banks was at an 18-year high. That added to concerns about the financial sector in the eurozone's fourth-largest economy.

The emphasis on economic growth has been welcomed by Obama, who has argued that the stimulus steps he took in 2009 put the U.S. on the road to recovery.

U.S. officials have been encouraged by recent discussions in Europe to ease up some belt-tightening so that spending cuts aren't as deep or as swift and to increase spending on public works projects like roads and schools in weaker parts of Europe. They also point to Germany's recent decision to negotiate higher public sector wages, a move they say could have a positive ripple effect on demand.

Merkel herself has made conciliatory gestures, saying in a television interview this week that she was open to helping stimulate the Greek economy provided Greece honored pledges to shrink its debt.

 

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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