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Germany Isolated Over Euro Crisis At G-8 Meeting In Chicago
2012-05-20 04:13:59 (227 weeks ago)
Posted By: Intellpuke
President Barack Obama and U.K. Prime Minister David Cameron clashed with the German Chancellor Angela Merkel at the G-8 summit in Camp David, demanding she set out a clear path for Europe to emerge from its current crisis.

The German leader resisted pressure for fresh measures that would include looser monetary policy for the European Central Bank, enabling quantitative easing similar to that deployed by the Federal Reserve and the Bank of England.

President Obama and Prime Minister Cameron discussed their joint position at a G8 summit in Camp David during a 7 a.m. meeting held on a treadmill, possibly the first U.K.-U.S. bilateral to be conducted in a gym.

With pressure growing for world leaders to come up with a decisive plan for solving the crisis, it emerged the Germans were resisting the inclusion of details in the final communiqué about the best course of action for the euro zone.

The so-called sherpas, appointed by national leaders to draft summit communiqués, were at work until 4 a.m. on Saturday trying to forge a common position that said something specific about the euro crisis. It was being suggested that the Germans, partly due to their isolation at the summit, were pressing for specifics to be deferred to an informal E.U. council later this week, arguing it was not the business of the G-8, including Canada, Russia, Japan and the U.S., to tell the E.U. states how to handle their economy. Cameron's aides took the view that it would look distinctly odd if the communiqué did not highlight solutions.

(story continues below)

Following a heated two-hour discussion, the final communiqué does refer to the crisis, saying "a strong and cohesive euro zone is important for global stability", and adds "Greece should remain in the euro zone". British sources were saying it was absurd that Merkel had tried to keep any reference of the euro crisis out of the communiqué and that the two-hour discussion had underlined to her the need for urgency.

The discussion on the global economic crisis at Camp David was opened at the request of President Obama by the Italian prime minister Mario Monti, seen as the power broker in Europe between austerity and growth factions.

Britain, although outside the single currency and committed to a hard-line deficit reduction program at home, would like to see the ECB be more interventionist and stimulate demand through capital spending.

Referring on CNN to the austerity and growth divide, Monti said: "I think these two positions need to be bridged. If it is demand to remove bottlenecks in the supply of goods and services – so, broadly, investment demand – then I think we regard it more positively than the most conservative European authorities do.

"On the other hand, if it is an across-the-board crusade for more demand, then I believe that the German reluctance to that is not entirely unfounded."

He also pointed out that for the U.S., as a reserve currency, it was easier to be relaxed about big expansions of demand. Cameron, speaking after his 35-minute workout with Obama, said: "What is required is a sense of urgency, but then clear action for strong banks and strong contingency plans for whatever might happen. The strengthening of the banks, governments and firewalls, all of those things need to take place very fast."

He said Merkel was right to say every country needed strong deficit plans. "Growth and austerity are not alternatives," he said, adding that the euro zone needed to follow the U.K. monetary policy, a reference to quantitative easing.

Suggestions that the G-8 might advocate using strategic oil reserves to drag down the oil price appear premature, partly due to the recent fall in oil prices, and concerns that President Obama would be seen to be putting U.S. security at risk. The G-8 will instead say they will keep the idea under review.

Intellpuke: You can read this article by Guardian Political Editor Patrick Wintour, reporting from Chicago, Illinois, in context here:

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