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Europe

Assertions of G20 Unity Mask Underlying Transatlantic Tensions

European countries are pushing for the G20 summit to focus on revamping the global financial architecture, but clashes with the US over stimulus packages continue to overshadow their drive ahead of the meeting this week.

G-20 logo

G20 members have different views on market regulation and stimulus packages

Transatlantic tensions over the focus of the summit have marked the run-up to the April 2 meeting in London, which is supposed to be a demonstration of top-level unity between the world's leading economic powers.

European leaders have repeatedly rebuffed US pressure to plough more money into their ailing economies as part of an international effort to revive withering global demand.

The dispute turned ugly last week when Czech Prime Minister Mirek Topolanek, whose country holds the rotating EU presidency, described the United States' ambitious but costly economic stimulus plans as "a way to hell."

He also said "the United States is not on the right path" with its costly stimulus plans, and insisted "we need to read the history books" to avoid the same mistakes.

The remarks sent top aides scrambling to backtrack, with one insisting Topolanek never made the "hell" remark.

Since then, officials have been trying to paper over transatlantic differences.

Tough talking ahead but world wants unity, says Brown

British Prime Minister Gordon Brown said on Monday that tough talking would be needed but he felt that the world's financial powers were united in finding solutions to the crisis.

British Prime Minister and Labour Party leader Gordon Brown

Brown says he will do all he can to make the summit a success

"We no doubt have some long days of negotiation ahead. These are difficult and complex problems. It will not be easy to reach the conclusions that I believe are necessary for the world economy," said Brown, but he added that his recent series of preparatory meetings with world leaders had made him feel certain that "the world wants to come together."

Brown said he would continue to do "all I can to build consensus and to enable an agreement to take us out of this recession and put the whole world back onto a path of growth."

"This is a decisive moment for the world economy. We have a choice to make. We can either let the recession take its course and retreat into isolationism and protectionism ... or resolve as a world community to fight back against the global recession that is hurting people in every country and every continent," said Brown.

Obama rejects "either or" approach

In an interview with the Financial Times published on Monday, US President Barack Obama said it was important that the summit should deliver a "message of unity."

He rejected the idea of an "either or approach" between financial stimulus and regulation, saying that both were needed.

Barack Obama

Obama says both stimulus and regulation are needed

"We need stimulus and regulation. We need to deal with the problems right in front of us and we also need to make sure we're taking steps to prevent these types of breakdowns from happening again," Obama said.

With respect to the stimulus there would be an accord in London that G20 countries "will do what is necessary to promote growth and trade," he predicted.

However, he understood the "legitimate concerns" in some countries which had already initiated significant stimulus programs and wanted first to see how they worked.

European Commission chief Jose Manuel Barroso said on Friday that there was "no dichotomy between stimulating the economy and improving global financial regulation."

"We need both if we are to get the economy moving again and to restore confidence in a lasting way," he added

Europe, US both committed to stimulus measures

Washington is spending trillions of dollars to support its banking system and drag the world's biggest economy out of its deepest recession in decades.

Meanwhile, the 27-nation European Union has committed to economic stimulus measures in 2009 and 2010 worth 400 billion euros ($540 billion), equivalent to 3.3 percent of the bloc's gross domestic product.

The figure includes both national and EU level stimulus measures as well as automatic increases in social spending, such as unemployment benefits, which kick in when the economy weakens.

In Berlin, a German spokesman said there were "no points of contention here between us and the US government."

Barack Obama with Angela Merkel

Berlin insists there is no rift between Obama and Merkel

"For both of us, and our position has been made clear for some time, regulation of financial markets is the focus of the meeting," the spokesman said after Chancellor Angela Merkel and US President Barack Obama held a video conference on Thursday.

The rift between Europe and the United States over the focus of the summit has been narrowed by Washington's latest announcement for sweeping financial regulatory reforms, including a single watchdog for all key financial institutions and payment systems.

Like the United States, the EU wants to clamp down on hedge funds, private equity funds and the use of complicated credit derivatives as well as offshore tax havens.

Europe is also in favor of doubling the International Monetary Fund's resources for bailing out troubled countries to $500 billion, while Washington wants to go even further by tripling its funds.

It also wants colleges of supervisors for all major cross-border financial institutions to be set up before the end of 2009 in order to keep a closer eye on big international groups.

Talk of tensions is overblown but rifts exist, say experts

Experts in transatlantic relations say that despite the desire of all the major developed and developing powers at the G20 to show a united front, differences of emphasis do exist.

Symbolbild Euroscheine Schwarzes Loch Trichter

Some European nations are against pouring more money into the economy

"The Obama administration has been pushing Europeans to spend much more, but the Europeans are baulking at that," Kati Suominen, a fellow with the German Marshall Fund of the United States, told AFP. "Particularly the bigger countries, France, Germany and the current holder of the European Union Presidency, Czech Republic, have been very adamantly opposed to new spending. So there is a little bit of a rift there."

Dan Price, a former assistant to President George W. Bush for international economic affairs, argued that reports of discord between nations like France and Germany and the United States were "somewhat overblown."

He pointed out that Washington had acted broadly to enact crisis rescue measures since the G20 finance ministers meeting in the UK just three weeks ago.

At those talks, US Treasury Secretary Timothy Geithner said Washington would provide a capital assistance program for finance firms, and outline a plan to clear toxic assets from the books of crippled banks.

"I think the United States goes into the meeting having done what it said it would do," said Price, now senior partner for global issues at Sidley Austin LLP. "The United States will be interested to hear what the other nations will do in this regard."

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