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Obama Arrives in Toronto for Summit Meetings

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Canada’s Prime Minister Stephen Harper (L) welcome U.S. President Barack Obama at the G8 Summit at the Deerhurst Resort in Huntsville, Ontario, June 25, 2010.

New York Times
June 25, 2010

TORONTO — President Obama arrived here Friday for back-to-back meetings of world leaders that will test international unity on how to restore global economic growth.

After landing, Mr. Obama quickly boarded a helicopter for a G-8 meeting in Muskoka, Ontario, about 100 miles to the north. Less than five hours before his arrival, Congressional negotiations reached agreement on sweeping legislation to overhaul the architecture of financial regulations, an accomplishment that gives momentum to his role at the meetings of the Group of 8 and the Group of 20 countries.

“We need to act in concert for a simple reason: This crisis proved, and events continue to affirm, that our national economies are inextricably linked,” Mr. Obama said on the White House lawn before leaving for Toronto.

The White House press secretary, Robert Gibbs, told reporters aboard Air Force One that the Unites States was “leading the world in dealing with the financial system.”

But the world’s richest countries find themselves divided on several areas that require global coordination, including proposals to tax giant banks and impose tougher capital and liquidity requirements on them.

Perhaps the biggest area of potential disagreement is when and how indebted countries, including the United States, should pull back the extraordinary spending programs they undertook to revive their economies.

In a letter last week, Mr. Obama cautioned that countries should not withdraw spending too quickly.

“We must be flexible in adjusting the pace of consolidation and learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession,” he wrote.

But in an essay published Friday in The Globe and Mail, Britain’s new prime minister, David Cameron, argued that reining in deficits was essential to promoting economic growth.

“Of course, there must be the flexibility for countries to act, taking account of their own national circumstances,” Mr. Cameron, the Conservative leader of Britain’s first coalition government since 1945, wrote. “But I believe we must each start by setting out plans for getting our national finances under control.”

While the fiscal question has preoccupied discussion among economists, the Obama administration said this week that the United States and Europe were not in fundamental conflict.

A senior administration official said that American and German officials were largely on the same page about whether the global economy needed stimulus or deficit-cutting over the next year.

“Everybody is for growth,” the official said. Although German officials have been publicly emphasizing the steps they will eventually take to reduce their deficit, the actual cuts they will make in the near term are quite small, the official added; the United States is on course to reduce its deficit significantly faster than Germany in 2011 and 2012.

A crucial issue at the G20 will be whether Europe is pursuing structural reforms — like changing labor rules to make it easier to fire workers — that support the expansion of domestic demand, the official said.

The United States government reacted far more aggressively to the financial crisis than most Europeans governments, including Germany’s, did, according to International Monetary Fund data. The Europeans, for their part, say the United States, as the country where the financial crisis started, had more to do.

The United States will run a larger deficit than Germany in 2010 and 2011 — thus doing more to stimulate the economy than the Germans, economists say. But the United States is also withdrawing its stimulus at a more rapid rate than the Germans, I.M.F. numbers show.

The G-20 meeting that will begin here Saturday will also test the leaders’ resolve in reaching a consensus on new bank capital standards by November, when the G-20 leaders are to meet again in Seoul, South Korea.

Several of the G-20 countries have new leaders who will be encountering Mr. Obama for the first time. Along with Mr. Cameron, Japan’s new prime minister, Naoto Kan, and Australia’s, Julia Gillard, the first woman to occupy the position, will meet with Mr. Obama for the first time since taking office. Both Mr. Kan and Ms. Gillard took office this month, Ms. Gillard just this week.

Canada, Australia and Japan have expressed reservations about proposals supported by the United States and Europe for a global bank tax, but the recent changes in governments complicate that picture.

Kazuo Kodama, a spokesman for Japan’s Foreign Ministry, said here on Friday morning that “a one-size-fits-all approach may not be productive,” but said it was not accurate to characterize Japan’s new government as being opposed to a bank tax.

The G-8 leaders will meet in a lakeside lodge in the village of Huntsville. In meetings and over dinner, the G-8 leaders will discuss poverty alleviation — a topic that global relief organizations say has been largely neglected during the economic crisis. Mr. Obama will return to Toronto on Saturday.

Mr. Obama will have at least six one-on-one meetings with other leaders. But except for Mr. Cameron, all of the confirmed bilateral meetings so far are with Asian leaders — Mr. Kan of Japan, Hu Jintao of China, Manmohan Singh of India, Lee Myung-bak of South Korea and Susilo Bambang Yudhoyono of Indonesia — in a reflection of Asia’s role in leading the global economic recovery.

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