In the midst of the eurozone crisis, with a new Greek prime minister sworn in today, and with world leaders at the G20 summit in Los Cabos striving hard to fix the world economy, has a very public dividing line emerged between the leaders of the US and Europe?
Clause 12 of the G20 Leaders Declaration (pdf) states:
All G20 members will take the necessary actions to strengthen global growth and restore confidence. Advanced economies will ensure that the pace of fiscal consolidation is appropriate to support the recovery, taking country-specific circumstances into account and, in line with the Toronto commitments, address concerns about medium term fiscal sustainability.
Those advanced and emerging economies which have fiscal space will let the automatic fiscal stabilizers to operate taking into account national circumstances and current demand conditions. Should economic conditions deteriorate significantly further, those countries with sufficient fiscal space stand ready to coordinate and implement discretionary fiscal actions to support domestic demand, as appropriate.
In many countries, higher investment in education, innovation and infrastructure can support the creation of jobs now while raising productivity and future growth prospects. Recognizing the need to pursue growth-oriented policies that support demand and recovery, the United States will calibrate the pace of its fiscal consolidation by ensuring that its public finances are placed on a sustainable long-run path so that a sharp fiscal contraction in 2013 is avoided.
President Obama’s insistence that a “sharp fiscal contraction” be avoided in 2013 stands in stark contrast to the austerity, austerity, austerity mantra of the European Right, most notably Germany chancellor Angela Merkel and our own prime minister David Cameron. It is telling Obama should seek to state this so openly by inserting it into the Los Cabos summit’s Leaders Declaration.
As the links below show, the stimulus-led recovery of the US economy leaves the stagnating UK economy firmly in its wake:
• US economy grows as UK economy shrinks 27 Apr 2012
• Obama/Cameron love-in comes unstuck over cuts 25 May 2011
To recap, in the first quarter of 2012, the US economy grew by an annualised 2.2 per cent – or 0.55% on a quarter on quarter basis, compared to the UK’s 0.2 per cent quarter-on-quarter contraction in Q1 2012.
In all, over the course of the 18 months since George Osborne’s spending review, the UK economy has shrunk by 0.2 per cent; over the same period, the US economy has grown by 2.8 per cent. America’s economy is now 1.3 per cent above its pre-crisis peak; Britain’s is now 4.3 per cent below.
Isn’t it time Messieurs Cameron and Osborne (and Frau Merkel) listened to Mr Obama?