Camp David, Maryland: Group of Eight (G-8) leaders expressed their wish to see Greece stay in the euro zone at a Camp David summit as the group papered over deep-seated divisions about how best to tackle the crisis.
With the future of Europe’s currency union in doubt, leaders of the world’s largest economies called on Greece on Saturday to 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 euro zone for global stability and recovery,” a final G-8 joint communique stated. “We affirm our interest in Greece remaining in the euro zone while respecting its commitments.
The summit took place after an electoral romp for Greek anti-austerity parties, that called into question the country’s commitment to reforms and could leave G-8 creditors facing a choice between loosening austerity demands or turning off the bailout spigot. The latter would almost certainly lead to a Greek default and exit from the euro zone, sparking global panic.
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 G-8 summit.
US President Barack Obama noted leaders’ agreement that growth and jobs must take precedence over austerity.
“As all of the leaders here today agree, growth and jobs must be our top priority,” Obama said at the conclusion of the meeting.
“The direction the debate has taken recently should give us confidence that Europe is taking significant steps to manage the crisis,” he said.
Ahead of the meeting, Obama jettisoned his neutrality, backing French and Italian efforts to rebalance German-led austerity-first policies.
Critics say two years of single-minded focus on debt reduction have fuelled rampant unemployment, brought Greece to the verge of bankruptcy and deepened crises in Italy and Spain.
Any deepening of those crises could have costly repercussions for the US economy and Obama’s chances of re-election in November, factors that perhaps spurred him to wade into European political waters.
Inevitably that brought tensions with German Chancellor Angela Merkel that were evident throughout the summit.
Merkel has long demanded reforms be the first, second and third priorities as she tries to assuage German taxpayer opposition to repeated bailouts. Her displeasure was evident on Friday when a casually dressed Obama greeted G-8 leaders to his cabin for an informal dinner, designed to encourage candor.
It started well. Obama welcomed Merkel to the summit with a cordial: “How’ve you been?”
But when her response came—a shrug and pursed lips —Obama rushed to bridge the obvious gap: “Well, you have a few things on your mind,” he conceded.
At the end of the meeting, Merkel insisted Germany and France were in agreement on the need for both growth and austerity, saying: “Otherwise we would not have been able to agree on a statement.”
The statement, however, noted “the right measures are not the same for each of us”.
After a meeting between Obama and Merkel, the White House was at pains to point out the president “understands just how much of a leadership role” the chancellor plays in Europe.
The coming weeks will tell if the G-8’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 a 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.
“The European Union Council on 23rd (of May) should identify concrete paths, like reinforcing the capital of the European Investment Bank, project bonds and an evolution towards eurobonds.”