G8 paper over tensions, back Greece in euro
G8 - Washington - Photo EC
(CAMP DAVID) - G8 leaders expressed their wish to see Greece stay in the eurozone at a Camp David summit Saturday, as the group papered over deep-seated divisions about how best to tackle the eurozone crisis.
With the future of Europe's currency union in doubt, leaders of the world's largest economies called on Greece 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 eurozone for global stability and recovery," a final G8 joint communique stated. "We affirm our interest in Greece remaining in the eurozone while respecting its commitments."
A recent electoral romp for Greek anti-austerity parties has called into question the country's commitment to reforms.
Although fresh polls are scheduled for June 17, there is no certainty that pro-bailout factions will win.
A loss could leave Greece's guarantors, many of whom were gathered in the rural presidential retreat, with a fateful choice: loosen demands on Greece or turning off the bailout spigot.
The latter would almost certainly lead to a Greek default and exit from the eurozone.
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 G8 summit.
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 steep repercussions for the US economy and Obama's chances of re-election in November, factors that perhaps spurred him to wade in to 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 Friday when a casually dressed President Obama greeted G8 leaders to his cabin for an informal dinner, designed to encourage candor.
It started well. Obama welcomed Merkel with a cordial: "How've you been?"
But when her response came: a shrug and pursed lips, Obama rushed to empathize, "Well, you have a few things on your mind," he told her.
Near 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."
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.
Looking to the longer-term, there appeared to be 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."
But according to one senior European politician not taking part in the discussions at Camp David, finding projects that could quickly stimulate the Greek or other economies may not be easy.
Earlier discussions at the retreat's rustic collection of cabins in the wooded Catoctin Mountains focused heavily on Iran and the ongoing bloodshed in Syria.
G8 leaders sent a strong message to the Islamic Republic that tough energy sanctions would be firmly applied, vowing to ensure oil markets are adequately supplied and to prevent soaring crude prices.
The move came days before the next round of nuclear talks between global powers and Iran that will take place in Baghdad on Wednesday.
Obama said he was "hopeful" the negotiations would be productive and stressed that major powers were "unified" against Iran.
Obama also said the G8 agreed that the political process in Syria should move forward "in a more timely fashion."
"We had a discussion about Syria, we all believe that a peaceful resolution and a political transition in Syria is preferable."
But as the United Nations weighs sending more military observers to the country, it was not clear whether Russia and the rest of the G8 had bridged differences over the fate of Syrian President Bashar al-Assad's regime.
The G8 club of developed nations includes Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.
The focus now turns to Chicago, where many of the members of the G8 will go next for a NATO summit.