The chief question at this weekend's G20 summit will be how to
keep the world economy growing. The Europeans are cutting government
spending, ignoring President Obama's call for more stimulus.
World leaders are preparing for three days of meetings in Canada
at the G20 summit, where the major theme will be the state of the
Is the globe looking at a second recession that might require
another burst of government stimulus? Or is the economy safe enough
so that world leaders can begin to rein in their budget deficits to
calm financial markets?
These will be two of the major questions discussed starting
Friday when world leaders meet in Canada - first the Group of Eight
(G8), comprised of the major industrial nations such as the US and
Germany, and then the G20, which includes such countries as
Indonesia and Saudi Arabia.
"The theme that will dominate both the Toronto G20, and probably
the G8 Muskoka Summit as well, is governing the global economy at
this precarious time," says John Kirton, director of the G8 Research
Group in Toronto.
On one side of the table, the United States is set to argue that
now is not the time to slow or even contract government spending on
such things as roads and employment programs. On the other side are
nations, such as Britain and Germany, intent on reducing budget
deficits to avoid the financial market turmoil that beset Greece,
which was forced to cut its spending and then saw riots in its
The two approaches are sure to result in some lively debate - if
not a conclusion.
"The big story here is that they cannot identify what the problem
is - not enough fiscal stimulus or too much," says Jeffrey Kopstein,
a political scientist at the University of Toronto. "You can't agree
on a solution if you can't agree on the problem."
Obama's message to G20 colleagues
In a letter to his G20 colleagues June 16, President Obama wrote,
"Our highest priority in Toronto must be to safeguard and strengthen
the recovery." What that means, he wrote, is "we should reaffirm our
unity of purpose to provide the policy support necessary to keep
economic growth strong."
Less than a week later, the United Kingdom's new Conservative
Prime Minister, David Cameron, presented a budget that dramatically
shrinks government spending and raises taxes. Some major UK programs
could shrink by 25 percent if the budget is adopted.
Mr. Cameron's Chancellor of the Exchequer, George Osborne, called
it an emergency budget. The emergency? The UK is borrowing one pound
for every four pounds spent, he explained.
The danger for Mr. Osborne: The belt-tightening in the UK could
sap economic growth when the spending cuts and tax hikes go into
effect next year.
However, Jay Bryson, an international economist at Wells Fargo
Securities, says he doubts it will drive the country into a