World Leaders Weigh Stimulus Vs. Austerity at G-20 - ABC News

With major European economies on the brink of collapse, leaders concluding an annual Group of 20 meeting sought Tuesday to reassure the world that they would find a way to put out the debt-fueled economic wildfire that has threatened banks, wiped out jobs and toppled governments across the continent.
But the presidents and prime ministers gathered in this seaside resort seemed content to delay any major decisions for a while longer, releasing only a general statement that stopped short of committing any nations to greater spending unless conditions worsen and urging fiscal responsibility.
For months, governments and economists have weighed two different paths to ease the financial crisis: spending more to try to stimulate growth or slashing budgets. European leaders headed home without announcing any significant agreements, and they aimed to meet again later this month in Brussels, with a goal of adopting a more detailed plan.
Still, the battle lines in the stimulus-versus-austerity debate were clearly drawn among the 24 heads of state gathered in a heavily guarded convention hall lined by a moat. The conservative leaders of the United Kingdom, South Korea and Germany came out decisively for austerity, warning that budget cuts were crucial to restoring fiscal order and worldwide confidence.
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Mexican soldiers patrol the beach of San Jose... View Full Caption
Mexican soldiers patrol the beach of San Jose del Cabo in Mexico's Baja Peninsula, Sunday, June 17, 2012. The G-20 summit starts in Los Cabos on Monday. (AP Photo/Eduardo Verdugo) Close



"The countries in crisis will have to find measures that might be painful and politically unpopular in the short term, but nonetheless they must pursue this path," South Korean President Lee Myung-bak said Monday.
On the other side were left-leaning governments such as those in Argentina, Brazil and France that have denounced the German-imposed austerity plan for struggling countries such as Spain and Greece and pushed for more stimulus spending.
President Barack Obama said European leaders "grasp the seriousness" of their debt crisis and are moving with a "heightened sense of urgency" to find a solution.
After the summit, Obama said the economic problems in Europe won't be solved by the G-20 or the United States, but by European nations. He said he was confident they could do that, but acknowledged the difficulty of getting all the separate legislatures to agree.
That the leaders adopted only some general policies is typical of G-20 declarations, said Jacob Kirkegaard, a research fellow at the Washington-based Peterson Institute for International Economics.
"On the big issue of the hour, of weeks and months, the G-20 communique is not going to make a big difference," Kirkegaard said. "The communique will repeat the mantra about strong, balanced, global growth. With each member state free to do whatever they want, that's the way to paper over those differences."
Indeed, the statement's reassuring words failed to sooth troubled world stock markets, which remained mixed and nervous Tuesday.
Germany must shoulder a large share of the contributions to bail out economically weaker European countries that overspent for years. In exchange, Germany has been insisting on steep cutbacks from aid recipients such as Greece.
Those cutbacks have led to dramatic economic hardship for voters in Greece and other countries. A growing number of European countries have been advocating spending and growth, not austerity, and the G-20 statement made limited mention of such a possibility.

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