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Obama, G-8: Recovery takes both growth and cutting

Confronting an economic crisis that threatens them all, President Obama and leaders of other world powers on Saturday declared that their governments must both spark growth and cut the debt that has crippled the European continent and put investors worldwide on edge.

By Ben FellerAssociated Press, Jim KuhnhennAssociated Press / May 19, 2012

France's President Francois Hollande, U.S. President Barack Obama, Britain's Prime Minister David Cameron, and Russia's Prime Minister Dmitri Medvedev attend the first working session of the G8 Summit at Camp David, Maryland Saturday.

Philippe Wojazer/Reuters

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CAMP DAVID, Md.

Confronting an economic crisis that threatens them all, President Barack Obama and leaders of other world powers on Saturday declared that their governments must both spark growth and cut the debt that has crippled the European continent and put investors worldwide on edge.

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"So far so good," Obama proclaimed after economic talks at Camp David, his secluded and highly secure mountaintop retreat. He played international host in the midst of a re-election bid that will turn on the economy, underscoring his stakes in getting his allies abroad to rally around some answers.

Yet there were no bold prescriptions at hand. Instead, leaders seemed intent on trying to inspire confidence by agreeing on a broad strategy no matter their differences.

Coping with shaky oil markets, the leaders set the stage for a united release of national oil reserves to balance any disruption in world markets when tough new sanctions are imposed on Iran's exports because of its disputed nuclear program. The leaders said they were ready to take "appropriate action" to meet any shortages.

The mere preparation to release oil reserves could help calm markets and ensure that oil prices, which have been dropping, don't climb again and anger consumers as U.S. elections approach.

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The Group of Eight summit includes leaders of the United States, Japan, Britain, Germany, France, Italy, Canada and Russia.

German Chancellor Angela Merkel came to the summit as the European leader who had demanded austerity as the most important step toward easing the eurozone's debt crisis. But the election of Socialist Francois Hollande as president of France, and Greek elections that created political chaos in the country, were clear rejections of the belt-tightening Merkel represented.

Merkel said growth and deficit-cutting reinforced each other and that everyone around the table agreed. "That is great progress," she said. As for promoting growth, she said investments under consideration include research and development, Internet networks and infrastructure. But she said "this doesn't mean stimulus in the usual sense."

U.S. officials agreed, saying growth measures that the Europeans might pursue don't all require outright public spending, and could be in the form of public-private partnerships or in initiatives designed to loosen credit.

A joint summit statement reflected how urgently the countries must contain a financial crisis that could spread from the eurozone to the United States and infect the rest of the global economy. They declared unanimity in ensuring that Greece, which is crippled in debt and politically gridlocked, remains as part of 17-member euro currency union.

"The global economic recovery shows signs of promise, but significant headwinds persist," said G-8 leaders said. Yet with all of them facing their own difficult political realities, they built some sovereign wiggle room into their pledge to take all necessary steps, saying "the right measures are not the same for each of us."

The tension between austerity and growth – whether to slash debt by cutting budgets or use public money and other means to help spur economic growth – was the backdrop as Obama welcomed an emerging push for a balance between the two.

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