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1st Dec 2022

Obama presses EU leaders on growth

A weekend summit of G8 leaders hosted by US President Barack Obama stressed the need for the eurozone to focus on keeping Greece inside the euro - although plans are reportedly being drafted to deal with its potential exit.

"Our imperative is to promote growth and jobs.The global economic recovery shows signs of promise, but significant headwinds persist," leaders from the US, Japan, Canada, the UK, Germany, Italy, France and Russia, as well as the heads of the EU commission and the European Council, said in their final statement on Saturday (19 May).

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  • Football intermezzo at the G8 meeting: the UK's Chelsea won against Germany's Bayern Muenchen (Photo: The White House/Pete Souza)

The informal meeting at Obama's retreat in Maryland was an opportunity for the US president to show support for those EU leaders - such as France's new president Francois Hollande and Italian premier Mario Monti - pushing for less austerity-focused eurozone policies.

After the G8 summit, Obama warned about the effects of the eurozone crisis on the world economy.

"As all the leaders here today agreed, growth and jobs must be our top priority. A stable, growing European economy is in everybody's best interests, including America's," he said.

The final G8 statement was a typical diplomatic mix embracing both 'fiscal consolidation' and 'generating growth.' It reflected the strength of discussions on the importance of promoting growth - pushed by Washington and Paris - and the importance of maintaining the austerity line - pushed by Germany.

"We all have an interest in the success of specific measures to strengthen the resilience of the eurozone and growth in Europe. We support euro area leaders’ resolve to address the strains in the eurozone in a credible and timely manner and in a manner that fosters confidence, stability and growth," it says.

The statement also "affirmed" the leaders' "interest" in Greece remaining in the eurozone but noted the country must respect the terms of the austerity programme attached to the €130 billion bail-out.

Worries that a left-wing government after the 17 June election may drive the southern country out of the eurozone have prompted mass withdrawals from Greek banks.

This in turn has prompted ever more urgent statement by politicians.

"Contingency plans need to be put in place and the strengthening of banks, governance, firewalls - all of those things need to take place very fast," Britain's David Cameron told reporters.

But some reports suggest that EU officials may already be preparing for Athens' exit from the 17-nation eurozone.

EU trade commissioner Karel De Gucht on Friday told De Standaard newspaper that the commission and the European Central Bank were "working on emergency scenarios if Greece does not make it."

The EU's 27 commissioners reportedly talked about such a scenario last Wednesday, a senior EU official told the Wall Street Journal.

The flight of deposits from the Greek banking system threatens to accelerate the timetable of a potential exit, the source said: "If it reaches large dimensions then it's not solvable. At the current moment, it's manageable."

Spain hit by downgrades amid Greek contagion fears

Spain's economic woes deepened on Thursday as 16 of its banks and four regions were downgraded by Moody's, while statistics confirmed the country is still in recession, just as fears about a Greek euro-exit are running high.

Euro fears rise as Greeks withdraw money from banks

Greeks have withdrawn billions of euros from their banks in recent days, with the country's president warning of "panic" at the prospect of the country leaving the eurozone. Markets are equally jittery, pushing Spain closer to a bail-out.

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