G8 leaders want Greece to stay in euro zone

CAMP DAVID, Maryland: G8 leaders said they want debt-stricken Greece to stay in the euro zone at a Camp David summit as the group papered over deep-seated divisions about how best to tackle the euro zone crisis.
With the future of Europe's currency union in doubt, leaders of the world's largest economies called on Greece Saturday to stick to the terms of a massive EU-IMF cash-for-reforms bailout, which is hanging by a thread.
"We agree on the importance of a strong and cohesive euro zone for global stability and recovery," a final G8 joint communique stated. "We affirm our interest in Greece remaining in the euro zone while respecting its commitments."
May 6 polls saw Greek anti-austerity parties on top, casting doubt on Athens' commitment to reforms and raising the question for its partners of whether to ease up on austerity or turn off the bailout spigot.
The latter course would almost certainly lead to a Greek default and exit from the euro zone, sparking global panic, and tensions are rising ahead of new polls June 17 which are not guaranteed to produce a viable government.
The latest opinion poll Sunday in Greece gave the radical left Syriza party, opposed to the bailout, 28 percent of the vote, with the conservative New Democracy, which supported the deal, on 24 percent.
A poll Friday put Syriza in second with 21 percent, behind New Democracy on 23.1 percent, but sentiment is volatile as most Greeks want to keep the euro but cannot stomach endless austerity after years in recession.
Syriza head Alexis Tsipras is meanwhile due to visit Paris and Berlin next week for talks with leftist European leaders, including Jean-Luc Melanchon, who polled strongly in the French presidential elections which brought Francois Hollande to power earlier this month on a pledge to support growth.
The drama in Greece and growing voter unease in European powerhouses France and Germany pushed the euro zone crisis right to the top of the G8 summit agenda.
Obama noted leaders' agreement that growth and jobs must take precedence over austerity.
"As all of the leaders here today agree, growth and jobs must be our top priority," Obama said at the conclusion of the meeting.
"The direction the debate has taken recently should give us confidence that Europe is taking significant steps to manage the crisis," he said.
Ahead of the meeting, Obama came out in favor of French and Italian efforts to put the focus on growth, rather on German-favored austerity policies.
Critics say two years of single-minded focus on debt reduction have fueled rampant unemployment, brought Greece to the verge of bankruptcy and stoked crises in Italy and Spain.
Any further deterioration could have costly repercussions for the US economy and Obama's chances of re-election in November, factors that perhaps spurred him to wade into European political waters.
Inevitably that brought tensions with German Chancellor Angela Merkel that were evident throughout the summit but she insisted by the close that there were no differences with France.
"Otherwise we would not have been able to agree on a statement," she said.
The statement, however, noted "the right measures are not the same for each of us."
After a meeting between Obama and Merkel, the White House was at pains to point out the president "understands just how much of a leadership role" the chancellor plays in Europe. It also stressed that growth measures would not take the place of fiscal reform but would work in tandem. Looking to the longer-term, there appeared to be broad agreement about specific European stimulus spending, funded by common European bonds — another controversial step opposed by Berlin — and by the European Investment Bank.
"We should not just wait for structural reforms and the reduction of deficits to generate growth," said Italian Prime Minister Mario Monti. The G8 club of developed nations includes Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.
Meanwhile, German Finance Minister Wolfgang Schaeuble said yesterday Greeks will not only be electing lawmakers in elections next month but voting on whether their country stays in the euro zone.
"Europe is ready to help the Greek people... But Europeans can't do the work of that Greece must do, that depends on the Greeks," he told the Sunday edition of Greek daily Kathimerini.
"Greek voters won't be voting only for a party next month. They will also vote on existential questions and it is important that their choice takes into everything into account," he added.
May 6 polls saw Greek anti-austerity parties gain ground, casting doubt on Athens' commitment to reforms and raising the question for its partners of whether to ease up on austerity or cut off rescue funds.
The latter course would almost certainly lead to a Greek default and exit from the euro zone, sparking global panic, and tensions are rising ahead of new polls June 17 which are not guaranteed to produce a viable government. Schaeuble's comments follow a reported suggestion by German Chancellor Angela Merkel that Greece hold a referendum on its euro membership alongside general elections next month.
Merkel's office has denied she made such a suggestion, but the German weekly Spiegel reports she did in fact propose to Athens that it hold a referendum.
Moreover, it said Schaeuble raised such an idea at the meeting of euro zone finance ministers last Monday, with a "yes" vote signifying support for austerity measures which were accepted by Greece's previous government.
Such austerity measures, such as slashing the minimum wage and amending labor laws to facilitate layoffs in a country already grappling with an unemployment rate of over 20 percent, helped propel the leftist party Syriza to second place in the May 6 election. Syriza called such measures "barbaric" and said they must be overturned immediately. Schaeuble argued against any easing of the conditions attached to the Greece's second EU-IMF bailout of 237 billion euros ($300 billion).
FROM: AGENCIES
"To tell the Greeks that they need not apply austerity deals to which they have agreed is to lie to them," he told the weekly Bild am Sonntag.
"And then structural reforms in Greece are necessary in any case, there's no more 'we'll muddle through as usual'," he added.
"European solidarity is not a one-way street," said the German minister said.