G-8 agrees economy is bad, but differs on what to do
| Washington
Here鈥檚 a news flash: The leaders of the globe鈥檚 richest countries all agree that the state of the world economy is not good.
Heads of state meeting at the G-8 conference in Italy concurred on July 8 that 鈥渟ignificant risks鈥� remain to world economic health, despite months of stimulus spending and other recovery efforts by governments from the US, to Europe, to China.
So are President Obama, German Chancellor Angela Merkel, British Prime Minister Gordon Brown, and the other members of this exclusive club plotting more joint moves to counter the downturn? Not at the moment.
The G-8 summit failed to produce a coherent strategy for further action, due to widely divergent views about the nature of the current crisis, and the value of further stimulus efforts.
鈥淭hat is pretty much what we鈥檇 expected,鈥� says Steven Schrage, a former senior State Dept. official who is now an international business expert at the Center for Strategic and International Studies. 鈥淭hey had really lowered expectations about a major [economic] breakthrough.鈥�
In terms of international economic policy, this week鈥檚 G-8 meeting is a kind of interim event, says Mr. Schrage -- a bridge between April鈥檚 meeting of the larger group of G-20 nations in London, and September鈥檚 G-20 summit in Pittsburgh.
The G-20 meetings include official representatives from developing nations such as India and China, which will play a large role in helping the world pull out of global recession.
鈥淢ore coordination globally could help juice this economy forward,鈥� says Schrage.
Not all world leaders would frame the issue in that way. Chancellor Merkel wanted this week鈥檚 G-8 to focus on exit strategies -- methods of getting out from under the massive debt incurred by the US and other nations in saving financial institutions and attempting to jump-start domestic economies.
This debt load could fuel inflation and cause further significant damage in the years ahead, in Merkel鈥檚 view.
President Obama, Prime Minister Brown, and others would prefer to focus on pulling out of the recession before tackling the debt problem. The G-8 skated over this disagreement by noting that it exists, in diplomatic language.
鈥淓xit strategies will vary from country to country depending on domestic economic conditions and public finances,鈥� said a draft statement from G-8 leaders.
Fiscal stability is a mid-term problem, said Mike Froman, US Deputy National Security Advisor for International Economic Affairs, at a July 8 press briefing. Soon it will be time to start cutting back on massive deficit spending. But as of July 8 that time has not arrived.
At the G-8, leaders 鈥渟aid it鈥檚 time to prepare exit strategies, but not necessarily time to put them in place,鈥� said Mr. Froman.
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