Merkel looks increasingly isolated as Obama backs calls for eurozone growth
GERMAN chancellor Angela Merkel was becoming increasingly isolated yesterday as US President Barack Obama backed calls for the eurozone to promote growth policies and move away from pure austerity.
In a communique released at the conclusion of their meeting on Saturday, the group of eight industrialised nations (G8) said it was their "imperative" to promote growth and job creation. The move endorses calls to move beyond just cutting back on spending, long championed by Mrs Merkel, and is a victory for new French leader Francois Hollande who was elected earlier this month on a platform of government spending to boost growth at the expense of only concentrating on deficit reduction.
The meeting, which was dominated by differences between several leaders on how best to address the troubles of the euro, adds to the pressure on Mrs Merkel who has repeatedly ruled out a stimulus package for European countries that have lapsed back into recession since the start of the year and are apparently in danger of being caught in a debt trap with little prospect of recovery in the near term.
Those problems have only been exacerbated by the results of the recent election in Greece, which has raised the prospect of the country leaving the single currency.
"We agree on the importance of a strong and cohesive eurozone for global stability and recovery, and we affirm our interest in Greece remaining in the eurozone while respecting its commitments," said the G8.
It was unusual for the often bland G8 communique to single out a relatively small nation but the problems there have spooked markets.
The depth of the divide between the leaders was made clear, however, with the G8 acknowledging "that the right measures are not the same for each of us". After the meeting concluded Mrs Merkel sought to play down the rift, saying solid finances and growth "belong inseparably together and should not be put into contrast". In contrast, Mr Obama, who has pursued growth policies himself, insisted "growth and jobs must be our top priority".
Despite the differences, however, there are signs that Germany may be softening its position.
A US spokesman said there were signs of an "emerging consensus" between the two countries on how to deal with the crisis, while Germany's largest industrial union struck its biggest pay deal in 20 years early on Saturday.
The Franco-German divide, though, shows little sign of being resolved immediately. Last night it emerged that Mr Hollande has "strong doubts" about plans to appoint German Finance Minister Wolfgang Schaeuble as chief of the eurozone's finance chiefs.
Mr Hollande has apparently told "responsible people in Brussels" that Mr Schaeuble must resign from his current German post if chosen.
The French president said Mrs Merkel has to make "large concessions" if she wants Mr Schaeuble to get the job, 'Der Spiegel' reported.