G8 leaders end summit with pledge to keep Greece in eurozone

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Created on Saturday, 19 May 2012 00:00

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G8 leaders end summit with pledge to keep Greece in eurozone

US and France succeed in putting promotion of growth at top of communique despite Germany's resistance to stimulus package

Ewen MacAskill

Barack Obama and the other G8 leaders wrapped up their negotiations on the European crisis at Camp David on Saturday with a pledge to keep Greece in the eurozone and to promote growth.

The communique, which had the growth promise at the top, represents a victory for Obama and the new French president, François Hollande, over German chancellor, Angela Merkel, who has resisted calls for a stimulus package.

But it may be shortlived. The communique was short in detail and Merkel could re-establish her dominance next week at an informal European meeting.

The eight leaders meeting at the US presidential retreat in Maryland issued a communique declaring in its opening paragraph: "Our imperative is to promote growth and jobs."

It added: "The global economic recovery shows signs of promise, but significant headwinds persist. Against this background, we commit to take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses, recognising that the right measures are not the same for each of us."

The communique was issued after almost four hours devoted to the eurozone crisis, which could have a negative impact on the US economy and Obama's re-election chances in November.

Obama favours Europeans adopting a stimulus package similar to the one he instigated in the US in 2009, as does Hollande. They both also favour keeping the eurozone intact, including Greece, though this may in the end prove difficult.

The communique said: "We welcome the ongoing discussion in Europe on how to generate growth, while maintaining a firm commitment to implement fiscal consolidation to be assessed on a structural basis. We agree on the importance of a strong and cohesive eurozone for global stability and recovery, and we affirm our interest in Greece remaining in the eurozone while respecting its commitments."

After three years of facing European leaders committed to deficit reduction, Obama has a new ally in Hollande. Speaking at Camp David, Hollande said European leaders were trying to balance the competing aims of reining in their budgets while stimulating their economies: "As President Obama noted, we need to pursue these two goals simultaneously: budgetary solvency and maximum growth."

Obama and David Cameron clashed with Merkel on Saturday, demanding she drop her G8 resistance to setting out a clear path for Europe out of its crisis. Measures resisted by the Germans included a looser monetary policy for the European Central Bank that would enable quantitative easing similar to that deployed by the Federal Reserve and the Bank of England.

Source: The Guardian UK