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G-8 leaders endorse policy of economic growth

Meeting at Camp David, the leaders of the Group of 8 industrialized nations also emphasize that debt-ridden Greece should remain in the Eurozone.

May 20, 2012|By Christi Parsons and Don Lee, Los Angeles Times
  • President Obama walks with the other G-8 leaders at the presidential retreat at Camp David, Md.
President Obama walks with the other G-8 leaders at the presidential retreat… (Guido Bergmann, Pool Photo )

CAMP DAVID, Md. — In a significant political victory for President Obama, the leaders of Germany and other European nations endorsed a policy of economic growth over austerity and emphasized that Greece, which is trying to battle its way out of a crippling debt crisis, should remain in the Eurozone.

Meeting on the cloistered grounds of the presidential retreat here, the leaders of the Group of 8 industrialized nations said in a joint statement that Eurozone economies should work to narrow deficits through "fiscal consolidation" and that each country must decide for itself the best mix of policies for promoting economic recovery.

But the weight of the communique, put together during a round-table session Saturday morning, was clearly on spurring growth and doing it in a credible and timely manner to avert a deepening of the crisis and an unraveling of the fragile global recovery.

"Our imperative is to promote growth and jobs," the communique said in its opening statement, which was followed by nine more references to growth.

Although the group didn't list specific steps to rev up Europe's sagging economies, the focus on growth represented a substantial shift given Germany's longtime insistence on fiscal discipline, including slashing government spending.

The G-8 leaders — representing Britain, Germany, France, Italy, Japan, Canada, Russia, as well as the U.S. — also signaled they may have to tap the world's strategic petroleum reserves in coming months to keep oil flowing during a possible supply shortage.

That was intended as a warning to Iran, which faces toughening sanctions this summer as Western powers try to discourage its nuclear ambitions.

As the summit wrapped up, Obama extolled its progress.

"There's now an emerging consensus that more must be done to promote growth and job creation right now, in the context of these fiscal and structural reforms," he said. "Today we agreed that we must take steps to boost confidence and to promote growth and demand while getting our fiscal houses in order."

German Chancellor Angela Merkel, who has been the chief proponent of austerity, joined in embracing growth as well, saying she thinks that it is important to "work on both threads" and applauding the accord as "great progress."

Domenico Lombardi, a senior scholar at the Brookings Institution in Washington, called the summit outcome "very positive" and said it indicated that Merkel, with her insistence on austerity, had become isolated within the G-8. The communique, he said, "underscores that the objective end of any policy action must be geared toward growth."

The leaders also took up other issues, including expanding food security in Africa, but they were preoccupied with the Eurozone problems. The crisis has worsened recently with Greece's failure to form a government, along with massive cash withdrawals from Greek banks by people fearing Greece's exit from the Eurozone.

Although Obama appeared to make progress with his pro-growth agenda, experts said it remained to be seen what concrete steps would be taken. European leaders are scheduled to meet informally this week to talk about adding a growth component to their so-called fiscal compact.

"Obama and the Europeans want to have their cake and eat it: a tight budget, growth, social harmony and smiling voters," said James Walston, a professor at the American University of Rome commenting on the communique. "If before, the Europeans were driving with the foot equally on the brake and the accelerator, today they've eased off the brake and are ready to put it gingerly on the accelerator."

The talks Friday and Saturday played out in an unusual setting for a G-8 summit, a yearly meeting that typically takes place in a large convention center with hundreds of journalists, staffers and nongovernmental officials milling about.

A few months ago, Obama decided to move this year's meeting from Chicago to Camp David. He told his staff that he wanted a more intimate setting so that leaders could get to know one another personally.

Over the weekend, leaders took walks together in the woods and sat on the patios of their cabins to chat, a far cry from the highly formalized "bilateral" meetings that always seem to require a retinue of staff.

On Saturday, Obama held his morning meeting with British Prime Minister David Cameron at the Camp David gym, with the two working out on side-by-side treadmills. He served chocolate cake to the Japanese prime minister for his birthday. Except for a small pool of reporters with only limited access to the grounds, the summit took place outside public view.

For their group meetings, the leaders met around a small table, elbow-to-elbow. At one point Saturday, they took pens and began marking up the working draft of the communique themselves, passing it around the table.

As a result, the document improved, said Michael Froman, the White House national security staffer who usually writes the communiques. He wouldn't describe exactly how.

The summit, Camp David's largest gathering of world leaders, came as the G-8 grapples with the turmoil of the debt crisis. Voters' dissatisfaction was driven home by France's recent election of Socialist President Francois Hollande, who ousted Nicolas Sarkozy, an advocate of austerity policies.

Most members of the group have moved to a much more public venue: the North Atlantic Treaty Organization summit in Chicago, which Obama also is hosting.

Getting to know one another better is not on the agenda.

christi.parsons@latimes.com

don.lee@latimes.com

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