‘Difficult’ Americans hamper G20 efforts to secure a global deal

Times Online
(David Charter and Philip Webster

A rift between Europe and America over the crux of the G20 summit was last night threatening Gordon Brown’s hopes for a deal to rescue the world economy.

The size of the challenge facing the British Government in bringing together world powers was emphasised in a candid admission by Britain’s most senior civil servant that it was proving “unbelievably difficult” to liaise with the Obama Administration to prepare for the meeting.

There was also growing scepticism over Mr Brown’s call for at least $200 billion for the International Monetary Fund to bail out cash-strapped nations, with no indication that China would come up with the bulk of the funds as some in No 10 hope.

A simmering row about the whole point of the G20 meeting on April 2 burst into the open when Larry Summers, chief economic adviser to President Obama, called on other countries to follow America’s lead in pumping even more money into stimulus plans to revive the world economic system.

The United States’ stimulus package of $787 billion is equivalent to about 5.5 per cent of its annual economic output, although it is spread over three years, whereas the EU has struggled to reach agreements on a sum that barely reaches 1.5 per cent of its total GDP.

Mr Summers’s plea was attacked by Jean-Claude Juncker, the Luxembourg Prime Minister, who heads the eurogroup of single currency countries. He declared: “The 16 euro-area ministers agreed that recent American appeals insisting that the Europeans make an additional budgetary effort to combat the effects of the crisis was not to our liking.”

Mr Juncker suggested that the eurozone countries would rather adopt a wait-and-see approach than rush to incur even more debt.

His outspoken words were followed by mystification from Germany. Peer Steinbrück, the German Finance Minister, speaking after EU finance ministers met in Brussels, said: “There was a significant amount of bewilderment about this in our discussion.”

There were the first signs of expectations being managed in Downing Street yesterday as the EU-US position became clear. Mr Brown was still hoping for a “grand bargain” from the summit, a source said, but the message yesterday was on how difficult it could be to achieve one. “We are by no means talking it down but I do not think anyone is suggesting the world’s problems can be solved in a single day,” a government source said.

Meanwhile, in remarks to a Civil Service conference that he probably did not expect to be reported, Sir Gus O’Donnell said that No 10 was finding it “unbelievably difficult” to prepare with the US. The Cabinet Secretary was speaking about the advantages of a permanent civil service and the difficulties of dealing with a Government with hundreds of appointees. “There is nobody there,” Sir Gus said. “You cannot believe how difficult it is.”

Another official said that getting the rest of Europe, let alone China, to do more in the way of fiscal stimulus was “not going to be straightforward”.

Alistair Darling will have the task of trying to steer the G20 back on track in preparatory talks of finance ministers in London on Friday and Saturday. But Mr Brown faces a hard battle next week at the European Council heads of government meeting, where EU countries plan to bind his hands over their objectives for the G20.

A spokesman for the Government urged the EU yesterday to present a united front. “We believe that the EU needs to work together to bring about the recovery we need,” he said.

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