G8 leaders agree need for growth, stability

US: G8 host President Barack Obama declared the group “absolutely committed” to growth and fiscal reforms Saturday as leaders of the world's major economies tried to bridge divisions over the eurozone's deepening crisis.

With the future of Europe's currency union in doubt, Obama stressed the need for policies that would span competing demands for growth-friendly spending and German-backed budget cuts.

“All of us are absolutely committed to making sure that both growth and and stability, and fiscal consolidation, are a part of an overall package,” Obama said, while flanked by G8 leaders at his Camp David rural retreat.

The all-of-the-above approach masks deep divisions within the G8, that have seen the United States support French efforts to upend two years of Berlin-led austerity-first policies.

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

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.

Greece may be the first test after the clobbering in recent elections ofpro-austerity parties left a cash-for-reforms deal between Athens and the rest of Europe on life support.

Fresh Greek polls are scheduled for June 17, but amid widespread public anger there is no certainty that supporters of the painful reforms will win.

That would leave G8 members with a tough choice: loosen demands on Greece by backing more pro-growth policies, or stop assistance.

Financial markets are already betting that if anti-austerity parties win again, Germany will turn off the bailout tap, a decision that would likely force a Greek default and exit from the eurozone.

The prospect of Greece's eurozone exit -- which could have steep repercussions for the US economy and perhaps his chances of re-election -- had spurred Obama to wade neck-deep into European political waters.

There he risked the ire of his guest and Europe's paymaster German Chancellor Angela Merkel, who has demanded reforms to assuage stiff domestic opposition to repeated taxpayer-funded bailouts.

AFP