MercoPress. South Atlantic News Agency

Obama, , Hollande and Monti push for growth and debt reduction at G8 summit

Germany’s Merkel tough austerity approach to the Euro crisis questioned

President Barack Obama pledged at the G8 summit on Saturday to work with Europe on a package that balances growth with debt reduction as world leaders try to prevent the worsening Euro zone crisis from destabilizing the global economy.

At the Camp David retreat in Maryland's Catoctin Mountains, Obama and leaders from other major economic powers are seeking ways to soothe financial markets after worries about Spain's banking problems and the risk of a Greek exit from the Euro zone sent world stocks to their lowest levels this year.

A shirt-sleeved Obama opened the morning session on the global economy promising to seek ways to restore healthy growth and jobs and address concerns in Europe.

“All of us are absolutely committed to making sure that both growth and stability, and fiscal consolidation, are part of an overall package in order to achieve the kind of prosperity for our citizens we all are looking for,” Obama said.

After an early morning meeting with Obama, British Prime Minister David Cameron said he detected a “growing sense of urgency that action needs to be taken” on the Euro zone crisis.

European Union leaders seemed keen to stress on Friday that they would stand firm in protecting their banks, after news of escalating bad loans raised the spectre that rescuing Spain's banks would crash the Euro zone's fourth largest economy.

“We will do whatever is needed to guarantee the financial stability of the euro zone,” EU President Herman Van Rompuy said.

Earlier French President Francois Hollande suggested using European funds to inject capital into Spain's banks, which would mark a significant acceleration of EU rescue efforts.

Balancing a growth agenda with efforts to lower government debt through fiscal belt tightening is a crucial part of the G8 discussions. Obama has aligned himself with Italy's Prime Minister Mario Monti and the new French president in putting more emphasis on growth.

That places pressure on German Chancellor Angela Merkel, who has pushed fiscal austerity as the prime means of bringing down huge debt levels that are burdening European economies.

Voters in euro zone countries have shown frustration with that approach, ejecting the Greek government and in France the conservative Nicolas Sarkozy was defeated by Hollande, a socialist, in the May 6 elections.

However there are signs that Germany might be changing. Its largest industrial union IG Metall struck its biggest pay deal in 20 years early on Saturday. The 4.3% pay increase, more than double Germany's inflation rate, will boost worker buying power in the Euro zone's richest nation and lift consumption - something the United States long has urged as a means to bolster overall growth throughout the world's second largest economic region.

Speculation has grown that Obama will use an energy session at the G8 to seek support to tap emergency oil reserves before a European Union embargo of Iranian crude takes effect in July.

The Camp David summit kicked off four days of intensive diplomacy that will test leaders' ability to quell unease over the threat of another financial meltdown as well as plans to wind down the unpopular war in Afghanistan.

After the Camp David talks wrap up late on Saturday afternoon, Obama will fly to his home town of Chicago where he will host a two-day NATO meeting at which the Afghanistan war will be the central topic.

The summit at the Camp David presidential retreat, in Maryland is being attended by leaders of the US, Germany, UK, France, Italy, Japan, Canada, Russia the EU.