G-8 leaders endorse growth
Eurozone issues including Greece dominate meeting
CAMP DAVID, Md. – In a significant political victory for President Barack 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 and 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.
German Chancellor Angela Merkel, who has been the chief proponent of austerity, joined in embracing growth as well, saying she thinks 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.
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.”