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UPDATED: March 11, 2009
EU, U.S. at Odds Ahead of London G20 Summit

With less than one month to go before the Group of 20 (G20) summit in London on how to tackle the world financial crisis and economic downturn, the European Union (EU) and the United States remain at odds on what can be achieved.

While the EU is still pushing hard for tougher financial regulations at the global level, Washington wants to play it down by focusing on the real economy and pressing European countries to spend more on their national stimulus efforts.

In an interview with the Financial Times published on Monday, U.S. President Barack Obama's top economic adviser Lawrence Summers urged world leaders to pump more public money into the economy in a coordinated effort to boost demand and lift the world out of recession.

"The right macro-economic focus for the G20 is on global demand and the world needs more global demand," Summers was quoted as saying.

The Financial Times said his comments make it clear that Washington wants industrialized nations to share the responsibility for engineering a global demand-led recovery.

Summers is obviously targeting the EU since the 27-nation bloc has not spent as much as others to stimulate its economy, according to some critics.

The International Monetary Fund (IMF) said in a report last week that only the United States, Saudi Arabia, China, Spain and Australia are on track to introduce fiscal stimulus packages equivalent to 2 percent of their gross domestic product (GDP) this year.

Although EU leaders agreed to an economic stimulus plan worth 200 billion euros (256 billion U.S. dollars) at a summit in December, the sum was only equivalent to 1.5 percent of the bloc's GDP, the IMF said.

It warned that U.S. stimulus efforts would be less effective if other countries do not follow it.

But Washington's call has apparently been rejected by the EU.

Germany is "not discussing any additional measures" to boost its economy, German Finance Minister Peer Steinbrueck told reporters on Monday on arrival at the EU headquarters in Brussels for a regular meeting with his eurozone counterparts.

Steinbrueck's stand won support from his colleagues in the 16-nation eurozone.

Luxembourg Prime Minister Jean-Claude Juncker said after the eurozone meeting: "The euro area ministers agreed that the recent American appeals insisting that Europeans make additional budgetary efforts to combat the effect of the crisis was not to our liking."

"We are not prepared to go further in the recovery packages that we have put together," he said. "We are not giving the impression that we are considering implementing further recovery packages."

Meanwhile, Washington seems reluctant to see real progress in regulatory reform of the global financial architecture, a key demand which the EU has voiced.

In an effort to hammer out a common European position, leaders from eight EU countries met in Berlin last month. They backed sweeping new regulations for financial markets and hedge funds, which will be discussed by all 27 EU leaders at a summit next week.

"All financial markets, products and participants including hedge funds and other private pools of capital which may pose a systematic risk must be subjected to appropriate oversight or regulation," the leaders said.

As a key figure behind the EU push for better financial regulations, British Prime Minister Gordon Brown wants to use the opportunity of hosting the G20 summit as a drive for concrete results.

He paid a two-day visit to Washington earlier this month, seeking support from the U.S. government for a new global financial order.

Despite Obama's endorsement of regulatory reform, it is not likely the U.S. Congress will accept the idea, analysts said, warning the divergence across the Atlantic may complicate prospects for what the London financial summit can really achieve.

The U.S. government, however, has denied that there is a rift with the EU ahead of the summit.

"Our efforts at the G20 in London will focus on a number of subjects, both financial regulation and economic stimulus, largely because there is not one single solution to those problems," White House spokesman Robert Gibbs said on Monday.

(Xinhua News Agency March 11, 2009)

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