CAMP DAVID, Md. — Leaders of the world’s richest countries banded together yesterday to press Germany to back pro-growth policies to halt the deepening debt crisis in Europe, as President Barack Obama for the first time gained widespread support for his argument that Europe, and the United States by extension, cannot afford Chancellor Angela Merkel’s one-size-fits-all approach emphasizing austerity.
Pointedly recognizing “that the right measures are not the same for each of us,” the leaders of the Group of 8 nations, at a meeting hosted by Obama at Camp David, committed to “take all necessary steps” to strengthen their economies. They said they wanted to keep Greece in the eurozone and vowed to work to promote growth in Europe, although behind the scenes distinct differences remained over what kinds of stimulus policies to pursue.
It is by no means the final word in the growth-vs.-austerity fight that has been under way for two years. Even with the future of the European currency union in doubt, Germany has insisted that Europe’s ailing economies tackle their financial problems through spending cuts, a policy that critics say has caused higher unemployment, brought Greece to the edge of bankruptcy and worsened the crises in Spain and Italy.
The leaders did concede somewhat to Merkel’s position on austerity, acknowledging that national budget deficits had to be addressed. But they added that spending cuts must “take into account countries’ evolving economic conditions and underpin confidence and economy recovery,” a recognition of how much the austerity packages have dampened consumer and political confidence in Europe.
Also, in a warning to Iran, the leaders pledged to take steps to guarantee continued oil supplies after an oil embargo against Iran begins on July 1.
While Greece is not part of the Group of 8 — the club is made up of the United States, France, Germany, Britain, Italy, Canada, Japan and Russia — the political and economic crisis facing Athens hovered over the meeting. Greece has been unable to form a government after voters, angry over austerity measures, brought down the last government, and there is now talk of bringing back the drachma.
Meanwhile, Greece’s parliament was dissolved and fresh elections called for on June 17. The announcement came a day after politicians in Athens reacted angrily to an alleged suggestion by the German chancellor that a referendum should be held asking whether Greeks want to stay in the eurozone.
Merkel has denied widespread reports that she suggested the referendum during a telephone call with Greek President Karolos Papoulias on Friday.
Nevertheless, Greek politicians angrily rejected the suggestion.
With his own re-election bid tied to a fragile U.S. economic recovery that easily could reverse if Europe’s economy takes another turn for the worse, Obama was pushing hard yesterday for a eurozone growth package. U.S. officials said they hoped that after the full-court press this weekend at Camp David, Merkel would be more amenable to the pro-growth argument when she meets with European leaders this week at a summit to come up with specific steps to fight rising debt while spurring the economy.
The last time world leaders met to discuss the European debt crisis, in Cannes, France, in November, French President Nicolas Sarkozy joined with Merkel to push Italy to stick to an austerity package. But the tone was different this time. Sarkozy lost his re-election bid to Francois Hollande, who promises to focus on growth.
“If a company is forced to cut back in Paris or Madrid, that might mean less business for workers in Pittsburgh or Milwaukee,” Obama said to explain why the European crisis matters to the United States. He said that while Europe’s predicament is “more complicated” because it requires coordination among multiple governments, steps his own government took to blunt the impact of the U.S. financial crisis in 2008 and 2009, including the stimulus, can stand as an example for Europe.
Information from McClatchy News Service was used in this story.
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