G-8 leaders stress need for stimulus

July 8, 2009 10:29:10 AM PDT
World leaders agreed Wednesday that the global economy remains too shaky to begin rolling back massive stimulus measures right now. They also set a key goal in the fight against global warming, saying temperatures shouldn't increase more than 2 degrees Celsius. In their official statement on the economy, leaders of the Group of Eight countries said that they "note some signs of stabilization" but continued to stress a difficult outlook that would prevent them from unwinding fiscal stimulus until "recovery is assured."

"The economic situation remains uncertain and significant risks remain to economic and financial stability," the statement said. "We will take, individually and collectively, the necessary steps to return the global economy to a strong, stable and sustainable growth path."

The leaders did commit to prepare exit strategies, with the help of the International Monetary Fund, from the measures to boost growth through government spending, low interest rates, and expansive monetary policy. Germany, worried about running up crippling debt, has pressed for spending restraint, while other major economies like Britain, Japan and the United States can't rule out the need to pump in more money.

German Chancellor Angela Merkel emphasized the importance of the agreement to some day unwind the stimulus programs. "If we are lucky, then we have nearly reached the bottom. But we still then must then get out of the crisis," she told reporters.

The leaders gathered Wednesday in the quake-devastated central Italian city of L'Aquila, where the summit was held in a sign of support for the inhabitants. Over dinner later, they planned to turn their attention to world security issues from Iran to North Korea.

The leaders reached agreement on the temperature threshold after failing to press developing countries to approve a more far-reaching goal of reducing heat-trapping carbon emissions by 2050.

Climate change experts have said such an acknowledgment was significant because the G-8 has never prounouced itself on that temperature goal. Developing countries agreed in a provisional statement to the same phrasing of the G-8 statement.

Italian host, Premier Silvio Berlusconi, welcomed the leaders, many of whom arrived at the summit in electric cars bearing their nation's flag. President Barack Obama strolled into the summit site for the first G-8 meeting of his presidency.

The leaders also called on experts at the International Energy Forum to look at how they can dampen volatility in oil prices. France and Britain had sought the intervention of regulators to reduce what they called "damaging speculation" in oil futures markets. Oil prices have plunged from around $147 a barrel last July to $32 late last year, then to $73 last week.

The document also calls for a rapid conclusion to the stalled Doha round of talks aimed at promoting world trade, but failed to set a deadline. The talks about reducing subsidies and import tariffs have been stalled for years.

The leaders also endorsed an "enhanced global framework for financial regulation" and to address flaws in the current system to help prevent future economic crises, but fails to make any concrete proposals.

Leaders say they will address issues such as executive pay, definition of capital, risk management and the regulation of hedge funds and credit rating agencies.

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Colleen Barry, Jane Wardell and Nicole Winfield contributed from L'Aquila and Ben Feller from Rome.

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