Euro zone crisis to dominate G8

Fri, May 18, 2012, 01:00

US president Barack Obama called the European debt crisis an issue of "extraordinary importance" to the global economy and said that fiscal responsibility should be coupled with policies to promote growth.

Mr Obama made the comments after meeting with new French president Francois Hollande at the White House, hours before they join other leaders of the Group of Eight nations at a summit at Camp David, the presidential retreat in Maryland.

"We're looking forward to a fruitful discussion later this evening and tomorrow with the other G8 leaders about how we can manage a responsible approach to fiscal consolidation that is coupled with a strong growth agenda," Mr Obama told reporters.

Mr Hollande, through a translator, said growth must be a priority along with improved finances. He and Mr Obama "share the same views" that Greece should stay in the euro zone.

Leaders of major industrial economies meet this weekend to try to tackle a full-blown crisis in Europe where fears are growing that Greece could leave the euro zone, threatening the future of the common currency.

British prime minister David Cameron, who has been increasingly vocal in urging Europe to do more to resolve the debt crisis, will tell leaders they must work together to stop it from spreading worldwide, an aide said.

No major economic policy decisions are expected from the talks but officials said Mr Obama hoped to promote a discussion on a comprehensive approach to resolving the crisis.

He will seek to cement a bond with France's new leader at the White House later today before heading to Camp David for the talks.

Francois Hollande, sworn in this week as French president, has already made waves by challenging Europe's austerity focus and saying he will pull French combat troops from Afghanistan by the end of this year.

Mr Obama may use their introductory meeting in the Oval Office to encourage the 57-year-old Socialist to rethink his Afghanistan plans that put France on an earlier exit timetable than other Nato allies.

But the two leaders, who have both expressed support for pro-growth policies in Europe, are expected to form a common front on the euro zone crisis that could dominate this weekend's Group of Eight talks.

Mr Obama's administration spent heavily to tackle the 2007-2009 US recession, and Mr Hollande is seeking to take the edge off austerity with more job-creating infrastructure investments.He is not alone.


Cameron has become increasingly vocal in demanding Europe's leaders act more decisively, Canada's Stephen Harper has been a frequent critic, and of the euro zone G8 members, Italian premier Mario Monti was calling for profound growth measures even before Mr Hollande did.

That could leave Germany's Angela Merkel, who insists debt-cutting programmes cannot be diluted, cutting a lonely figure.

The G8 summit comes as Greeks are pulling cash from banks amid growing fears that it might crash out of the single currency euro zone.

Financial markets fear for the future of the entire currency zone, with Spain's banking sector also under pressure.

The US dollar climbed, world shares fell and German borrowing costs hit record lows today as a deepening Spanish banking crisis, uncertainty about Greece's future in the euro zone and lacklustre US data provoked a rush for safe-haven assets.

Heather Conley, a senior fellow at the Center for Strategic and International Studies, said Mr Hollande and Mr Obama "see things very similarly about the need for a better balance between fiscal consolidation, austerity and economic growth".

One of Obama's closest aides, National Security Adviser Tom Donilon, said the United States welcomed the evolving debate in Europe about the "imperative for jobs and growth", but he said the president's intention was not to drive a wedge between Europe's two biggest economies, Germany and France.

"I don't think that the nature of these conversations are going to be anything like taking one side or the other," he told reporters yesterday.

"The president looks forward to leading a discussion among the leaders about the imperative of having a comprehensive approach to manage the crisis and get on a sustainable path towards recovery in Europe.