With major European economies on the brink of collapse, world leaders concluding an annual Group of 20 meeting were left Tuesday with two different paths to ease the financial crisis: Spend more to try to stimulate growth or slash budgets in a bid to restore investor confidence.
For months, that dilemma has loomed over governments and economists as
they struggled to put out a debt-fueled economic wildfire that has
threatened banks, wiped out jobs and toppled governments all over
Europe. But on Tuesday, presidents and prime ministers meeting in this
seaside resort seemed content to delay any decision for a while longer,
according to a draft statement leaked ahead of the G-20's conclusion. Still, the battle lines in the stimulus-versus-austerity debate were
clearly drawn among the 24 heads of state gathered in a heavily guarded
convention hall lined by a moat. The conservative leaders of the United
Kingdom, South Korea and Germany came out decisively for austerity,
warning that budget cuts were crucial to restoring fiscal order and
worldwide confidence.
"The countries in crisis will have to find measures that might be
painful and politically unpopular in the short term, but nonetheless
they must pursue this path," South Korean President Lee Myung-bak said
Monday. On the other side were left-leaning governments such as those in
Argentina, Brazil and France that have denounced the German-imposed
austerity plan for struggling countries such as Spain and Greece and
pushed for more stimulus spending.
After Argentine President Cristina Fernandez met with her Brazilian
counterpart, Dilma Rousseff, the two sides were united in their
opposition to the existing bailout plan."At the same time, they agree that we need to listen to Europe,
especially to Germany, to see what measures it proposes to exit the euro
crisis," Argentine Foreign Minister Hector Timerman said.
Mexican President Felipe Calderon said the summit ended with a signed
document that included a comprehensive plan for the future but without
details. The document had yet to be released. European leaders plan to release a more complete response to the
continent's financial crisis during a summit at the end of June in
Brussels.President Barack Obama did not take a clear stand on the issue while
speaking briefly to reporters Monday, pledging only to work
"hand-in-hand to both grow the economy and create jobs while taking a
responsible approach."
The draft statement stopped short of committing the nations to greater
spending unless conditions worsen. It urged fiscal responsibility while
looking to education, innovation and infrastructure investment to spur
economies.Such fence-sitting is typical of G-20 declarations, said Jacob
Kirkegaard, a research fellow at the Washington-based Peterson Institute
for International Economics.
"On the big issue of the hour, of weeks and months, the G-20 communique
is not going to make a big difference," Kirkegaard said. "The communique
will repeat the mantra about strong, balanced, global growth. With each
member state free to do whatever they want, that's the way to paper
over those differences." Indeed, the statement's reassuring words failed to sooth troubled world stock markets, which remained mixed and nervous Tuesday.
Germany must shoulder a large share of the contributions to bail out
economically weaker European countries that overspent for years. In
exchange, Germany has been insisting on steep cutbacks from aid
recipients such as Greece.
Source: http://www.ethiomedia.com/2012_report/3911.html
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