The G-8 and G-20 Summits: Obama’s Thorn

President Barack Obama presented himself to the G8 and G20 summits in a position of force, with the U.S. Congress having adopted, just before his landing in Toronto, the most important financial system reform since the 1930s crisis. Translated to sports speak: USA 1, Europe 0.

During the 2008 and 2009 meetings, the world leaders had concentrated their discussions on the rehabilitation of a financial system filled with subprime mortgages and other exotic products. With this task accomplished, the main subject of the Toronto G8 and G20s was, in all logic, the renovation of the banking system. While the Americans prepared themselves for this task, the Europeans put all their energies into concocting new plans of austerity.

This division, provoked by the Greek stagnation, sparked a tolerably lively debate between Obama and, primarily, German Chancellor Angela Merkel. In fact, at the start of today’s meeting, members of the President’s team multiplied their warnings against a series of draconian measures that, they confirmed, will stifle the weak start of the economy. While Obama was sending a letter to 20 world leaders pleading them to stop politics opposed to stimulating growth, Treasury Secretary Timothy Geithner and Obama’s main economic adviser, Larry Summers, were jointly signing letters in financial newspapers.

Nothing came of it. The Europeans kept their positions, anticipating an arm wrestle with Obama and perhaps even with others. We explain. Recently, Washington asked the “big” net exporters — Germany, China and Brazil — to make an effort. For the moment, the request is minimal. China made a gesture worthy of mention — no doubt a symbolic gesture — this week by allowing an evaluation of its increase in currency. Brazil supported the American approach. Germany? It was a no, and it remains so.

To regain advantage, Obama pushed many of his players on the chessboard of regulation by motivating the Democratic majority in Congress to pass his reform before heading to Toronto. As a sign of the urgency and importance of the subject, the representatives and senators adopted said reform at the end of a 20-hour discussion-marathon. And so, after months of negotiations, the fact remains that Obama is consequently capable of saying to Europeans that logic prevailed. The financial crisis was caused by great vices of his system? We renovated it.

On this matter which is crucial for the economy as a whole, the Europeans did not provide the minimum service required but rather a lot of figuration. They arrived in Toronto in weak position.

Certainly, Merkel, Nicolas Sarkozy and British Prime Minister David Cameron are in agreement on imposing one tax on transactions and another on banks, but they have few chances of passing these since the United States joined Canada in going against them. If it can be said that Merkel and Cameron have revealed rigid plans, Sarkozy remains unclear for the moment. If we add, in terms of the G8, both the fact that Japan is confronted by a political crisis and that Italy better plays the role of the butt of jokes than the one which it has been entrusted, we can anticipate that the Europeans will be heading in dispersed directions. Quite dispersed.