G8 want Greece to stay in eurozone

2012-05-19 22:47
Maryland - G8 leaders stressed their desire to see Greece stay in the eurozone at a crunch Camp David summit on Saturday, as they smoothed deep-seated divisions about how best to tackle the eurozone crisis.

With the future of Europe's currency union in doubt, leaders of the world's largest economies demanded Greece stick fast to the terms of a massive cash-for-reforms bailout, which is hanging by a thread.

"We agree on the importance of a strong and cohesive eurozone for global stability and recovery," a final G8 joint communiqué stated. "We affirm our interest in Greece remaining in the eurozone while respecting its commitments."

A recent electoral romp for Greek anti-austerity parties has called into question the country's commitment to reforms, and although fresh polls are scheduled for June 17, there is no certainty that pro-bailout factions will win.

A loss would leave the international community with a choice between loosening their demands on Greece or turning off the bailout spigot, which would almost certainly lead to a Greek default and exit from the eurozone.

The drama in Greece, as well as elections in European powerhouses France and Germany, had pushed divisions about how to tackle the crisis right to the surface of the G8 summit.

Steep repercussions

Ahead of the meeting, which was held at the presidential retreat Camp David, Obama jettisoned his neutrality, backing French efforts to rebalance German-led austerity-first policies.

Critics say two years of single-minded focus on cutting Europe's sky-high debt had fuelled rampant unemployment, brought Greece to the verge of bankruptcy and deepened crises in Italy and Spain.

The crisis could have steep repercussions for the US economy and Obama's chances of re-election in November, factors that perhaps spurred him to wade in to European political waters.

Inevitably that brought tensions with German Chancellor Angela Merkel were evident throughout the summit.

Merkel has long demanded reforms be the first, second and third priorities as she tries to assuage stiff domestic opposition to repeated taxpayer-funded bailouts.

Her displeasure was evident on Friday when a dressed-down President Obama greeted G8 leaders at his cabin for an informal dinner that would last more than two hours.

Growth and austerity

Obama welcomed Merkel with a cordial: "How've you been?"

When her response came: A shrug and pursed lips, Obama conceded: "Well, you have a few things on your mind."

Near the end of the meeting Merkel said Germany and France were fully in agreement on the need for both growth and austerity, saying: "otherwise we would not have been able to agree on a statement".

The coming weeks will tell if the G8's new 30 000-foot view of mutually compatible austerity and stimulus survives contact with events on the ground.

Looking to the longer-term, there appeared to be broad agreement about specific European stimulus spending funded common European bonds and by the European Investment Bank.

"We should not just wait for structural reforms and the reduction of deficits to generate growth," said Italian Prime Minister Mario Monti.

Focus on Syria

"The European Union Council on 23rd [of June] should identify concrete paths, like reinforcing the capital of the European Investment Bank, project bonds and an evolution towards eurobonds."

According to one senior European politician not taking part in the discussions at Camp David, finding projects that could quickly stimulate the Greek or other economies may not be easy.

Earlier discussions at Camp David's rustic collection of cabins in the wooded Catoctin Mountains in Maryland focused heavily the ongoing bloodshed in Syria.

Obama said Saturday the G8 agreed that the political process in Syria should move forward "in a more timely fashion".

"We had a discussion about Syria, we all believe that a peaceful resolution and a political transition in Syria is preferable."

But as the UN weighs sending more military observers to the country, it was not clear whether Russia and the rest of the G8 had bridged differences over the fate of Syrian President Bashar al-Assad's regime.

Recovering assets

There was also broad G8 agreement about how to tackle upcoming talks with Iran.

Obama said world powers were "hopeful" about the talks in Baghdad on Wednesday, emphasising that the leaders agreed on how to tackle the crisis, in an implicit contrast to Iran's deepening isolation.

Diplomats said the weekend would also see agreement on how to help newly free Arab nations recover state assets moved abroad by members of previous regimes.

The G8 club of developed nations includes Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.

Read more on:    g8  |  barack obama  |  angela merkel  |  bashar al-assad  |  mario monti  |  iran  |  greece  |  economy

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