G-8 leaders look for signals of economic recovery

[July 08, 2009]  L'AQUILA, Italy (AP) -- World leaders began arriving for their annual summit Wednesday to seek broad consensus on ways to boost the world economy, combat climate change and confront security threats from Iran to North Korea, even amid growing sentiment that their Group of Eight forum can no longer claim leadership on the global political and economic agenda.

High on the agenda are discussions on widening the forum, with leaders including German Chancellor Angela Merkel advocating that the G20, which already has taken the lead on economic matters, also take over the international political agenda. Britain, Japan and Italy all want to retain a core G8, which represents leading industrial democracies and oil-rich Russia.

Chinese President Hu Jintao abruptly returned home after enthic tensions soared in China's western Xingjiang territory could weaken trust-building discussions on making further progress on climate change.

China is among five developing market economies -- along with Brazil, India, Mexico and South Africa -- who are participating in the summit for the fifth straight year, joining from Thursday to discuss bringing them on board, aid and developement. Also joining are nine African nations and a forum on climate change.

The leaders of the Group of Eight nations -- united in their desire to work together to fight the worst economic crisis since the Depression, divided on how much longer they need to keep the stimulus going -- are discussing Wednesday how to coordinate their exit strategies once their economies are stable.

But the financial data is still grim -- from rising unemployment to slowing growth -- and most economists think the crisis has yet to reach its nadir.

The leaders of the G-8 -- Britain, Canada, France, Germany, Italy, Japan, Russia and the United States -- will discuss when to begin the shift from the current emphasis on fiscal stimulus, but they also are likely to remain cautious in their assessment of recovery so far.

Both the United States and Europe have posted dismal jobless numbers. Unemployment in the euro zone rose in May to a 10-year high with more than 15 million people out of work. In the United States, the jobless rate jumped to a 26-year high of 9.5 percent in June as U.S. employers cut a larger-than-expected 467,000 jobs. Leaders fear more jobs still could be lost.

British Prime Minister Gordon Brown has emphasized that while there are clear signs of recovery -- stronger consumer confidence, housing markets and retail spending -- it is too early to be complacent or to change current policies. He will urge fellow leaders to push ahead with plans to boost the global economy despite suggestions the worst is over, emphasizing the need to continue coordinated international action, a British official said on condition of anonymity.

President Barack Obama signed an $787 billion economic stimulus bill in February, but experts say only about 15 percent of that has made its way into the economy so far -- creating a debate between the wait-and-see camp and economists who urge another stimulus, arguing the recession proved to be deeper and more devastating than originally believed.

White House press secretary Robert Gibbs said Obama is satisfied with the recovery steps taken thus far but "won't hesitate" to take others if he thinks they are necessary. Gibbs emphasized the rebound will take time and that U.S. economic recovery history shows that "creating jobs happens at the very end. And that's what we anticipate will likely happen this time."

Because the impact of stimulus was still being measured in many nations, the discussions on possible exit strategies will remain "quite academic," said John Kirton of the G-8 Research Group at the University of Toronto. "None of the three largest economies in the world are ready to move on to exit strategies."

He noted that German Chancellor Angela Merkel faces elections in September and the stimulus is unpopular among her supporters, while Japan, like the United States, is still waiting to gauge the impact of the last round.

The host Italians are promoting regulations to help prevent future economic crises based on a framework laid down at a G-8 Finance Minister's meeting last month. The 12-common principles aim to create a "strong, fair and clean economy" by fighting tax evasion, protectionism, bribery and money laundering.

Britain's leader said in an interview published Wednesday that the world economy can't recover if the financial markets aren't fair and honest at their base.

"The lessons that we learned with this crisis is clear: irresponsibility and excesses are not allowed. We can make the mistake once, not twice," Brown told the Milan-based daily Corriere della Sera.

France and Britain also want to discuss how to avoid excess fluctuation in oil prices, with a proposal for a price bracket high enough to allow oil companies to continue to invest while preventing prices from going too high

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The leaders of France and Britain, in a joint editorial in the Wall Street Journal on Wednesday, called on regulators to look at ways to reduce what they called "damaging speculation" in oil futures markets to combat the volatility of oil prices, which plunged from around $147 a barrel last July to $32 late last year, then to $73 last week.

The leaders will also discuss climate change and development aid later in the afternoon before taking on security issues, including Iran's crackdown on pro-democracy demonstrators and North Korea's firing of ballistic missiles into the ocean in violation of U.N. resolutions.

European leaders are pressing for a statement limiting the increase in the planet's warming to 2 degrees Celsius. It was unclear if Obama would back such a move. Gibbs suggested that the administration is putting its political emphasis on what it can accomplish back home with Congress, not with the G-8 at an international summit.

As the leaders headed to L'Aquila, over 100 Greenpeace activists occupied four coal-fired power stations across Italy, demanding more leadership on climate change. Coal is the worst climate pollutant of all the fossil fuels. ---

Jane Wardell reported from London. Emma Vandore contributed from Paris and Ben Feller from Rome and Nicole Winfield from L'Aquila.

[Associated Press; By COLLEEN BARRY and JANE WARDELL]

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