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Growth in peril, Obama warns

Sat., June 19, 2010

Letter to G-20 nations criticizes pullback in spending

WASHINGTON – President Barack Obama made apparent Friday that he disapproved of Europe’s pullback in spending and China’s refusal to let its currency rise in value – two contentious issues that threaten to create discord and disunity during the Group of 20 summit next weekend in Toronto.

In a public letter to leaders of the G-20 nations, Obama expressed concern about uneven growth in the global economy, and he warned about a premature withdrawal of government support to aid economic recovery. The president did not specifically mention Europe, but it was clear from his comments that Obama did not see eye to eye with Germany and other European countries that recently have pushed through fiscal austerity measures in response to the debt crisis in Europe.

“We worked exceptionally hard to restore growth; we cannot let it falter or lose strength now,” Obama said in the letter, released Friday by the White House. “This means that we should reaffirm our unity of purpose to provide the policy support necessary to keep economic growth strong.”

Many economists, including Federal Reserve Chairman Ben Bernanke, have warned about the dangers of the large budget deficits in the United States as well, and lawmakers in both parties, reflecting the public’s concern about deficit spending on this side of the Atlantic too, have been reluctant to back Obama’s calls for additional fiscal economic stimulus.

Although there’s debate within Europe on the timing of the so-called exit strategy of government support, the Greek debt crisis has clearly “swung the mood more in favor of making cutbacks deeper and more swiftly,” said Razeen Sally, co-director of the European Center for International Political Economy in Brussels, Belgium. “That points to an increasing division between the White House and European governments.”

And it’s not clear as it was last year that Obama will get support from European leaders at the G-20 meeting on another important goal: to push China to let its government-controlled currency rise in value.

Without mentioning China by name, Obama in his letter called on countries to adopt flexible exchange rates, which he said “are necessary to support a strong and balanced global economy.”


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