PRESIDENT BARACK Obama today voices optimism that this week’s crucial G20 summit will set the framework for recovery, saying world leaders know they must “deliver a strong message of unity” for the sake of the global economy.
Speaking to the Financial Timeson the eve of what some believe will be the most fateful economic summit in decades – but which others dismiss as a talking shop that will do little to halt further global contraction – Mr Obama played down talk of a split between the US and the leading continental European economies, notably Germany and France.
But he conceded that for all the US talk of the need for more measures to boost economic growth around the world, there has been a backlash at home against higher spending that may make it difficult for him to offer further economic stimulus measures soon.
“In all countries there is an understandable tension between the steps that are needed to kick-start the economy and the fact that many of these steps are very expensive and taxpayers have a healthy scepticism about spending too much of their money, particularly when it is perceived that some of the money is being spent not on them but on others who they perceive may have helped precipitate the crisis.”
He admitted it would be difficult for him to ask for more money to recapitalise the banking system until Wall Street convinces voters it is not misusing the money.
“If voters perceive that it’s a one-way street that we are just pouring more and more money into institutions and seeing no return other than avoiding catastrophe, then it is harder to make an argument for further intervention,” he said.
Mr Obama, who embarks tomorrow on his first big foreign trip as president, said he had agreed with Angela Merkel of Germany and Nicolas Sarkozy of France on the need to co-ordinate more fiscal stimulus and build new regulations.
“The press has tended to frame this as an ‘either/or’ approach,” Mr Obama said in his first interview with a global publication.
“I have consistently argued that what is needed is a ‘both/and’ approach. We need stimulus and we need regulation. We need to deal with the problems right in front of us and we also need to make sure we are taking steps to prevent these types of breakdown from happening again.”
In comments that appear to diverge from recent remarks by Ms Merkel, who has all but ruled out more deficit spending in Germany, Mr Obama said: “With respect to the stimulus, there is going to be an accord that G20 countries will do what is necessary to promote trade and growth.”
He added that “the most important task for all of us is to deliver a strong message of unity in the face of crisis.” However, Mr Obama hinted leaders would stop short of pledging to carry this year’s spending measures into 2010 – as the International Monetary Fund has urged. “There is legitimate concern that most countries already having initiated significant stimulus packages that we need to [first] see how they work,” he said.
The US president also called for G20 leaders to take “serious steps” to address toxic assets on their domestic bank balance sheets.
A draft G20 communique, obtained by the Financial Timesyesterday, does not contain specific plans for a fiscal stimulus package, which had been resisted by European countries.
But it does reiterate pledges to avoid protectionism and complete stalled global trade talks but gave few details on global economic stimulus action.
Mr Obama, whose approval ratings in the US remain high in spite of a growing backlash against his bailout of Wall Street firms, conceded that each country had its “own political rhythms”. He added that the G20 countries would have to fight off protectionism.
America's 44th president, whose nine-day trip will also encompass a Nato summit in Strasbourg, a EU summit in Prague and a two-day trip to Turkey also called for concerted action to assist developing countries by boosting the capacity of the IMF and other lenders. – ( Financial Timesservice)