Cameron vows to deal with 'imbalances' between economies

Published on Friday 25 June 2010 23:21

DAVID Cameron tried to smooth over a growing transatlantic spat over the economy as world leaders began the G8 summit in Canada.

Fresh from unveiling a 40 billion package of tax rises and spending cuts in Tuesday's austerity Budget, the Prime Minister is at the forefront of calls for countries which have got deep into debt during the financial crisis to start paying down their deficits.

But the United States – which also borrowed heavily to counter the recession – is more cautious, with president Barack Obama last week warning fellow members of the G20 group of major economies not to risk stalling global recovery by cutting too soon.

The US wants to keep spending to stimulate growth, amid fears of mounting unemployment and a possible double-dip recession.

In a round of TV interviews as the G8 Muskoka summit kicked off, Mr Cameron insisted that there was "no difference" between him and Mr Obama on the need for action to deal with imbalances threatening the world economy. And he stressed that the US president recognised that each country must take steps which were appropriate to its national circumstances.

Countries with healthy budget surpluses, like China, can stimulate growth by boosting domestic demand, but those which have run up debts need to restore confidence by "living within their means", he said.

"What I want to achieve above all is to get the right outcome for the world economy and that means those countries, like our own, with big budget deficits have to move faster. Other countries with surpluses can afford to do different things. Dealing with those imbalances – that is what this is really about."

He added: "Do we need to deal with the imbalances between the big surplus countries, like China and the big deficit countries like America and us? Yes, we do need to deal with these imbalances and that is what President Obama is speaking about."

This year's G8 gathering is focusing on development, with Canada pushing initiatives on child and maternal health in the poor world. The eight members – Britain, the US, France, Germany, Italy, Canada, Japan and Russia – will be joined by leaders of the Caribbean countries Haiti and Jamaica.

But Mr Cameron is putting on pressure for members to fulfil promises to double development aid made at the 2005 summit in Gleneagles. An accountability report showed they will fall $18bn short of pledges, with aid from countries like Japan and Italy actually falling over the past five years.

In a pointed article for Canada's Globe and Mail newspaper, Mr Cameron warned that the summits must be "more than just grand talking shops" and called for "fresh thinking and renewed political leadership" on issues like aid. And he later acknowledged it was "frustrating" when pledges made with great fanfare were not fulfilled.

"We made promises back in Gleneagles. We should stick to those promises," he said.