NEWS,19.05.2012

Europe's economic woes dominate G8 gathering

 

US President Barack Obama will press European leaders to ease up on fiscal austerity and focus on economic growth at a summit that will discuss ways to stem turmoil in the euro zone and head off the risk of global contagion.At the wooded Camp David retreat in Maryland's Catoctin Mountains, Obama and leaders from other large economic powers will try to forge a common approach to tackling a crisis that threatens the future of Europe's 17-nation single currency.Though no major policy decisions are expected from the Group of Eight summit, leaders hope they can bridge enough of their differences to soothe rattled financial markets after worries about the risk of a Greek exit from the euro zone sent European stock prices to their lowest level since December."Hopefully we'll get some stuff done," Obama told Italian Prime Minister Mario Monti as he and other summit participants arrived for Friday evening dinner at a lodge at the secluded presidential retreat.Obama earlier in the day aligned himself with Monti and new French President Francois Hollande by urging a solution to the euro zone crisis that combines fiscal belt-tightening measures with a "strong growth agenda."On the other side of the debate is German Chancellor Angela Merkel, who has pushed fiscal austerity as a means of bringing down huge debt levels that are burdening European economies.Voters in euro zone countries have shown frustration with that approach, ejecting governments such as that of Nicolas Sarkozy, who was defeated by Hollande, a socialist, in the May 6 French presidential election.A draft of the summit communique shown to Reuters will stress an "imperative to create growth and jobs."Also on the summit agenda are concerns about oil and food prices as well as Afghanistan, Iran, Syria and North Korea.Speculation has grown that Obama will use an energy session at the G8 to seek support to tap emergency oil reserves before a European Union embargo of Iranian crude takes effect in July.But with oil prices already sliding, a move by Obama to tap the Strategic Petroleum Reserve - alone or along with other countries - could expose him to criticism that the emergency supply should only be touched in a supply crisis.The Camp David summit kicked off four days of intensive diplomacy that will test leaders' ability to quell unease over the threat of another financial meltdown as well as plans to wind down the unpopular war in Afghanistan.After the Camp David talks wrap up late on Saturday afternoon, Obama will fly to his home town of Chicago where he will host a two-day NATO meeting at which the Afghanistan war will be the central topic.

 

EU, ECB working on Greece exit plans

 

The European Commission (EC) and the European Central Bank (ECB) are working on an emergency scenario in case Greece has to leave the eurozone, EU trade commissioner Karel De Gucht said in an interview published on Friday. The comments would appear to be the first time that an EU official has confirmed the existence of contingencies being taken for a possible Greek exit from the currency bloc. Speculation has been rife about such plans, but their existence has not been confirmed. "A year-and- a-half ago there may have been the danger of a domino effect," he said in an interview with the Belgium's Dutch-language newspaper De Standaard. "But today there are, both within the European Central Bank and the European Commission, services that are working on emergency scenarios in case Greece doesn't make it."He added: "A Greek exit does not mean the end of the euro, as some claim."” The source close to De Gucht said the commissioner was explaining that EU institutions had not been sitting on their hands for the past two years, and that they were now better prepared than they had been. Concern has grown that Greece may decide to leave or be forced out of the 17-country currency bloc after a rise in popular opposition to an EU-International Monetary Fund programme of fiscal austerity and structural reforms undermined attempts to form a government after May 6 elections. Greeks are scheduled to go the polls again on June 17. A victory by the far-left, anti-bailout coalition SYRIZA - which some opinion polls suggest is likely - would increase the possibility of the country leaving the euro. However, one opinion poll on Thursday showed the pro-bailout New Democracy party in first place, several points ahead of the SYRIZA, which has pledged to tear up the bailout agreement. The prospect of SYRIZA winning the election has sent the euro and markets across the continent tumbling this week. Earlier this week, the country's president said Greeks had withdrawn up to €800m from banks as the political uncertainty deepened. In a further blow, the ECB said it had halted liquidity operations with some Greek banks because their capital was too depleted. De Gucht told De Standaard he thought Greece would stay inside the eurozone, but that the crucial question until the next election was what conditions the ECB would set for guaranteeing the liquidity of Greek banks. "The endgame has begun, and how it will finish I do not know," he said. "The question is, can everyone maintain their sangfroid over the coming weeks." Asked earlier this week about any contingency planning for a Greek exit, the spokesperson for the EC replied: "There are many, many questions arising and many questions open about Greece and most answers have to come from Greece and we have to respect the ongoing political process. "Clearly, the future of Greece is in the eurozone. We are working on that."