Leaders of the Group of Eight nations said the worst has passed for the global economy following summit talks on promoting employment and growth.
While the economic outlook is subdued, risks have abated, the G-8 said in a statement early today, the halfway point of a two-day meeting in Enniskillen, Northern Ireland.
“Global economic prospects remain weak, though downside risks have reduced thanks in part to significant policy actions taken in the U.S., euro area and Japan,” according to the statement.
G-8 leaders are under pressure to spur growth and reduce unemployment as the unexpected slowing of the Chinese economy in the first quarter sparked concerns of a weakening global expansion. The euro-area economy is shrinking for a second year and the U.K. is emerging from a double-dip recession amid investor concern that the U.S. Federal Reserve is preparing to unwind stimulus.
Any new optimism “is yet to be translated fully into broader improvements in economic activity and employment in most advanced economies,” according to the G-8 statement.
German Chancellor Angela Merkel said European leaders agreed that “we have overcome the manifest crisis of confidence, but that a huge amount of work still lies ahead.” Growth requires “sound finances” and structural change in EU economies, she told reporters late yesterday.
Merkel expressed concern about Japan’s effort to end two decades of economic stagnation, which includes bond-buying by the Bank of Japan and $102 billion in planned stimulus spending by Prime Minister Shinzo Abe. Merkel, who met Abe separately at the summit, said Japan’s budget deficit “surely has to be scaled back in the medium term.”
Merkel, who leads Europe’s biggest economy, is running for a third term in Germany’s Sept. 22 election on a platform of preserving the euro in return for economic overhauls and debt reduction throughout the 17-nation currency union.
Underscoring the fragile outlook, the International Monetary Fund trimmed its 2013 global growth forecast in April to 3.3 percent from 3.5 percent. The estimate for 2014 is 4 percent as the U.S. picks up and the euro area begins expanding again.
In search of a recipe for growth while trimming budget deficits, leaders announced yesterday the start of talks next month on a trade deal between the U.S. and the European Union, which Cameron said could be the biggest bilateral deal ever. Merkel said she envisioned an agreement within “a few years.”
Reaching a deal “is going to be a priority of mine and my administration,” President Barack Obama said.