Economic crisis to dominate opening of G8 summit

Author: Reuters

Chinese President Hu Jintao pulled out of the meeting at the last minute
because of unrest in northwestern China in which 156 people have been
killed. His departure may complicate efforts to make progress towards a deal
that would limit global warming.

More than 30 world leaders will take part in some of the discussions spread
over three days, in recognition of the shifting balance of global economic
power.

Italian Prime Minister Silvio Berlusconi, beset by sex scandals, is the summit
host and will kick off proceedings at a lunch that will discuss the economic
outlook and regulations.

The summit takes place in the Italian city of L’Aquila which was wrecked by an
earthquake earlier this year – a fitting backdrop for discussions on the
crumpled global economy that is struggling to overcome the worst recession
in living memory.

Policymakers will agree the world economy is still too weak to remove stimulus
measures and will consider whether more work is needed to shore up banks,
European officials said.

Speaking on the eve of the summit, British Prime Minister Gordon Brown told
Reuters the world had to wake up to the scale of the downturn and stay
focused on restarting growth.

“I am not complacent and remain vigilant about the financial state of the
world,” said Brown.

The United States, Japan and France are likely to echo his caution, leaving
Europe’s largest economy, Germany, isolated if, as expected, it seeks a
commitment from the G8 to pull swiftly out of costly economic support
policies when recovery comes.

G8 leaders badly underestimated the economic problems facing them when they
met in Japan last year and Wednesday’s talks will touch on what nations must
do to prevent another such meltdown.

However, officials said few major initiatives were expected to emerge, with
the broader G20 forum, grouping rich industrial nations and major emerging
economies, tasked with formulating a regulatory response to the crisis
rather than the G8 nations.

The G20 met in London in April and convenes again in September in the United
States.

“In reality (L’Aquila) is just an intermediary step,” said a senior French
official.

Hu had been expected to take advantage of the L’Aquila summit to tell other
nations they should start considering a new global reserve currency as an
alternative to the dollar.

A Chinese delegation was still set to attend the talks and Berlusconi said he
had “encountered strong resistance” from Beijing over G8 efforts to narrow
differences over cuts in greenhouse gas emissions and funding for low carbon
technology.

The aim is to agree a goal of limiting global warming to no more than 2
degrees Celsius (3.6 degrees Fahrenheit) since pre-industrial times and
strengthen last year’s vague “vision” of halving global carbon emissions by
2050.

A packed first day is due to wrap up with talks on an array of international
issues, including Iran’s post-election violence and nuclear programme.
However, these are unlikely to lead to any immediate action, such as a
tightening of sanctions.

One area where officials said a breakthrough might be possible was trade. A
draft communique suggested the G8 and “G5” developing nations would agree to
conclude the stalled Doha round of trade talks in 2010.

Launched in 2001 to help poor nations prosper through trade, the talks have
stumbled on proposed tariff and subsidy cuts.

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