At Summit, a Struggle for Consensus on Economic Woes ~ WSJ

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Updated May 19, 2012, 7:20 p.m. ET
By CAROL E. LEE, SUDEEP REDDY and STEPHEN FIDLER

CAMP DAVID, Md. -- Leaders of the Group of Eight major economies struggled to agree on next steps to calm the euro zone debt crisis, with consensus at a weekend summit coming more easily on ways to cushion the world from an Iranian oil embargo.

Meeting at the presidential retreat here, the G-8 leaders agreed that the euro-zone turmoil posed a critical threat to the global economy. But there were distinct signs of differences on the crucial question of how to resolve them.

In a joint statement Saturday, the G-8 leaders said they would take steps to boost their economies, while "recognizing that the right measures are not the same for each of us."

For U.S. President Barack Obama, who can do little more than nudge European leaders toward a solution, an economic crisis in Europe that spreads to the U.S. could be a devastating blow to his re-election campaign.

"All of us are absolutely committed to making sure that both growth and stability -- and fiscal consolidation -- are part of an overall package that all of us have to pursue in order to achieve the kind of prosperity for our citizens

Photos: G-8 Leaders Meet
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European Pressphoto Agency

Leaders of the world's eight richest economies gathered in Camp David Saturday.

G-8 leaders, from left, Japanese Prime Minister Yoshihiko Noda, Italian Prime Minister Mario Monti, Canada's Premier Stephen Harper, new French President Francois Hollande, U.S. President Barack Obama, British Prime Minister David Cameron, Russian Prime Minister Dmitry Medvedev, German Chancellor Angela Merkel, European Council president Herman van Rompuy and EU Commission president Jose Manuel Barroso focused on Iran, North Korea, Burma and Syria during the Friday night dinner.
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Michael Froman, the White House deputy national security adviser for international economics who attended the day's sessions, said leaders showed "total consensus" that major economies needed to adjust their budgets and to boost growth. Officials generally agreed that major economies needed new steps to boost growth, even if they disagreed on how best to do that.

But others who attended the sessions indicated that divisions remained about how specifically to deal with Greece and the currency union's broader debt woes.

Some in the group, including new French President François Hollande, wanted to send a strong signal to Greece that its future lay in remaining within the euro zone.

But other leaders accepted German Chancellor Angela Merkel's position that argued that if support for Greece was unequivocal, it risked sending the message that Greece could have a free ride without having to meet conditions attached to its bailout aid.

The result was a lukewarm summit statement afterward in which the leaders said, "We affirm our interest in Greece remaining in the euro zone, while respecting its commitments."

Before the meeting, British Prime Minister David Cameron said, "There is a growing sense of urgency that action needs to be taken, contingency plans need to be put in place and the strengthening of banks, governments, firewalls… need to take place very fast."

But there was no sign of any concrete new initiative emerging from the meeting, in which non-euro-zone leaders recognized that decisive measures could only come from inside the currency bloc.

European Union leaders meet in Brussels on Wednesday for a summit aimed at pushing growth, in response to Mr. Hollande's election campaign and the urging of Italian Prime Minister Mario Monti. But no concrete new measures appear to be in the offing, and one senior European official said the meeting would likely be dominated by the "psycho-drama" of Greece.

The G-8 welcomed "the ongoing discussion in Europe on how to generate growth, while maintaining a firm commitment to implement fiscal consolidation."

Mr. Hollande took satisfaction in the fact that the role of growth had been expanded in the economic debate.

"In the name of France, I wanted to put growth at the heart of the debates, and make sure that growth, as well as budgetary discipline, could find its place in all meetings, at the G-8, at the European council, and at the G-20," Mr. Hollande told reporters at a press conference at Camp David.

For Mr. Obama, Ms. Merkel, the German leader, has been a key focus this weekend as Europe's chief driver of austerity and the continent's most powerful player in the euro-zone. Mr. Obama has prodded her in side conversations to ease her strict preference for budget-cutting as more of the Europe risks falling into recession.

The two were to hold a formal one-on-one meeting Saturday evening after the conclusion of the summit.

Mr. Obama hoped that the informal setting at Camp David would encourage free-flowing discussion among the leaders as a long list of security and economic concerns threaten to flare up in the coming months. Aides said the leaders frequently pulled each other aside on Friday night and Saturday morning for one-on-one discussions.

The G-8, the largest ever gathering of world leaders at Camp David, began with a Friday night dinner focused on several hot-button security issues.

On Saturday, leaders addressed a series of such concerns. The G-8 leaders vowed to maintain pressure on Iran amid growing concerns about the country's nuclear program. But they acknowledged that new U.S. sanctions and a European Union embargo in the coming months risked disrupting global oil supplies further.

The G-8 nations said they "stand ready" to call on the International Energy Agency, which coordinates emergency oil stockpiles for major energy consumers, "to take appropriate action to ensure that the market is fully and timely supplied," according to a separate statement Saturday.

The G-8 agreement is intended "to provide assurance that we are determined to implement the sanctions fully," Mr. Froman said. "It's an important statement -- to the market, to consumers, to producers, to the Iranians -- that the G-8 has a common position that they are ready to act."

U.S. officials said the leaders negotiated the specific wording of the statement themselves while sitting around a circular wooden table, a task at international summits that's usually left to aides.

G-8 leaders' discussion on Syria focused on the need to move toward political transition, Ben Rhodes, a deputy national security adviser, told reporters Saturday. The U.S., he said, used Yemen as an example. Mr. Rhodes said Russian Prime Minister Dmitry Medvedev "did not dispute" the need for a political transition in Syria.

Mr. Obama said Saturday that the leaders are supportive of a plan put forward by United Nations envoy Kofi Annan, but that it "has to be fully implemented and that a political process has to move forward in a more timely fashion."

Many G-8 leaders will leave for Chicago Saturday night to attend a meeting of North Atlantic Treaty Organization members.

Afghanistan will be the primary focus of the two-day summit.
—Gabriele Parussini and Toko Sekiguchi contributed to this article.

Write to Carol E. Lee at carol.lee@wsj.com, Sudeep Reddy at sudeep.reddy@wsj.com and Stephen Fidler at stephen.fidler@wsj.com
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