Germany’s Chancellor Angela Merkel and US President Barack Obama lead the way for French President Francois Hollande, Canada’s Prime Minister Stephen Harper, European Commission President Jose Manuel Barroso and Japan’s Prime Minister Yoshihiko Noda at the G8 Summit at Camp David, Maryland. Image Credit: Reuters

Camp David: The US and other members of the Group of Eight industrial nations agree that Europe's financial crisis must be addressed with a mix of growth and austerity measures, President Barack Obama said yesterday as leaders gathered for a shirt-sleeve discussion that also will cover world concerns about ups and downs in oil prices.

"All of us are absolutely committed to making sure that growth and stability and fiscal consolidation are part of an overall package," Obama said as he and other leaders gathered in a rustic cabin at this wooded presidential retreat.

Obama was referring to the debt crises in Greece and Spain, primarily, although he was not specific in brief remarks to reporters.

Taming the crisis

Leaders of the US, Germany, France, Canada, Italy, Britain, Russia, and Japan are trying to figure out how to tame Europe's debt crisis while also increasing the demand for goods and spurring job growth.

Meanwhile, Italian Prime Minister Mario Monti has taken a secret plan to create a European system of guarantees for bank deposits to the G8 summit, the Corriere della Sera newspaper said yesterday.

The proposal aims to guarantee bank deposits "with a view to ... stopping the haemorrhaging of funds from one country to another, from the south to the north," the newspaper reported. The plan was discussed on Friday at the summit, it said.

The plan envisages European governments jointly funding guarantees for bank deposits to reassure savers in the more vulnerable countries.

Many savers have already started withdrawing cash in Greece and other countries in the Eurozone, fearing banks could collapse or that countries might withdraw from the euro and convert their deposits into less valuable new national currencies.

The idea of establishing a pan-European fund has been discussed before in several international meetings.

Obama's argument for additional stimulus measures alongside belt-tightening is primarily aimed at Germany, the strongest member of the union that uses the common Euro currency, although Obama did not say so. German Chancellor Angela Merkel was seated a few places away at a small round table.

Balancing push

Leaders of the world's economic powers say Germany should balance its push for European fiscal austerity with doses of stimulus spending to avoid a financial calamity with global repercussions.

In talks yesterday, the leaders were looking to build consensus even though a decisive plan of action seemed out of reach for now. "We'll also be talking about uncertainty in the energy markets and how to resolve some of those issues," Obama said at the start of discussions on the global economy.

The G8 session sets the stage for a far more consequential European summit this week where the countries that share the euro as their currency hope to come together on specific steps to fight rising debt while spurring a recovery.