Global Biz

World leaders struggle for common ground

(Agencies)
Updated: 2010-06-27 17:54

TORONTO  - Leaders of the Group of 20 rich industrial and major developing countries were wrapping up their summit by agreeing to pursue separate strategies to sustain the fledgling economic comeback.

The United States continued to insist that stimulus spending is needed to bolster the rebound. But a growing list of countries, worried about a Greek-style debt crisis, prefer to cut government spending and raise taxes to attack ballooning deficits.

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The G-20 conference was scheduled to conclude with a final round of talks on Sunday on ways to attack global imbalances and how best to resolve differences on tougher global standards for the banking system, hoping to prevent a repeat of the financial crisis that struck with force in the fall of 2008.

The summit was launched in late 2008 to deal with the global financial crisis. Leaders of the older Group of Eight major industrial countries felt that the larger group, which includes major developing countries including China, Brazil and India, was the better forum to develop a broad economic strategy.

But reaching such a consensus has proven to be difficult.

Mindful that open signs of dissension could worry financial markets, the G-20 leaders sought to minimize their differences. They agreed that deficits must be tamed in the long term, but that different countries may use different tactics in the short term, depending on their levels of indebtedness.

However, the United States received some support for its warnings against cutting government stimulus too quickly.

"If we act hastily, if we are excessive in adopting the new fiscal policy adjustments, we could jeopardize the growth we have achieved," said Brazil's economic minister, Guido Mantega, who represented his country at the summit because President Luiz Inacio Lula da Silva remained at home to deal with severe floods.

French President Nicolas Sarkozy told reporters that President Barack Obama "clearly talked about the risks of debt and deficit" in the US.

US Treasury Secretary Timothy Geithner said world leaders understood they must work together to make sure the global recovery stays on track.

"The scars of this crisis are still with us," he said. "If the world economy is to expand at its potential, if growth is going to be sustainable in the future, then we need to act together to strengthen the recovery and finish the job of repairing the damage of the crisis."

Although the countries remained divided on economic issues, they found more common ground in the area of foreign policy.

A joint statement issued Saturday at the conclusion of the G-8 conference condemned North Korea for allegedly sinking a South Korea warship, pledged continued economic sanctions against Iran for its suspect nuclear program and endorsed a five-year exit timetable for Afghanistan.

The G-8 leaders had held their talks in a forested retreat in Canada's Muskoka lakes region and then moved on to Toronto to join the larger G-20 talks, beginning with a discussion of the global economy over two-hour, private Saturday night dinner.

Leaders were also holding one-on-one sessions on the sidelines of the two summits. Obama met separately on Saturday with Chinese President Hu Jintao, South Korean President Lee Myung-Bak and British Prime Minister David Cameron, who had hitched a ride with Obama on his helicopter, Marine One, allowing the two to have more discussion time.

It was Obama's first private meeting with Cameron since the conservative took power last month with a coalition government, and the first since an undersea well sunk by the British oil company BP PLC began gushing oil into the Gulf of Mexico. The environmental catastrophe has strained relations between the two historic allies.

According to a Downing Street spokesman, speaking on customary condition of anonymity, the two leaders agreed BP should meet its obligations to cap the leak, clean up the damage and pay legitimate compensation claims, but also that BP's long-term economic survival was important.

Obama used his meeting with South Korea's Lee to announce planned talks aimed at resolving issues blocking the completion of a free trade agreement with South Korea stalled since 2007. The president said his goal would be to clear up remaining differences with Seoul by the time he visits South Korea in November with a target of sending a completed deal to Congress for its approval by early next year.

Hu accepted an invitation from Obama for a formal state visit. White House officials said the two nations will work out a date. It would be the third state dinner of Obama's presidency, following ones for India and Mexico.