Leaders play down austerity split on eve of G20

Fri Jun 25, 2010 7:44pm EDT
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By Alister Bull and Gernot Heller

HUNTSVILLE, Ontario (Reuters) - The world's richest economies, burdened with debt after spending their way out of the credit crisis, papered over differences on Friday on how to clean up their finances with minimal damage to growth.

Leaders from the Group of Eight, a club that spans the large industrialized nations and Russia, met in Canada ahead of a broader summit with China and other rising economic powers of the G20, now the world's dominant economic policy forum.

Washington appeared to be at loggerheads with Berlin in the run-up to the Canada summits. U.S. officials expressed concerns that a nascent recovery from the global recession could be derailed by accelerating austerity in much of Western Europe.

German Chancellor Angela Merkel said, however, that the G8 talks had not produced any conflict over economic policy.

"The discussion was not controversial but was based on great mutual understanding," she told reporters.

A U.S. official said: "There is a broad consensus among the G8 leaders, a convergence of views...about how to maintain durable growth while also reaffirming, of course, the common shared commitments to fiscal consolidation going forward."

The G20 has struggled to keep the unity of last year when governments pumped trillions of dollars into the economy to prevent recession turning into depression and vowed to prevent another credit crisis from endangering the world economy.

U.S. President Barack Obama, buoyed by a deal in the U.S. Congress to toughen rules for Wall Street, urged other G20 leaders to make good on promises to curb risky bank behavior that sparked the financial crisis in 2007.   Continued...

<p>A protestor carries a sign during a demonstration in Allan Gardens Park in downtown Toronto, Canada June 25, 2010 ahead of the G20 summit in Toronto. REUTERS/Mike Segar</p>