World leaders differ on how to nurture global economy

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After showing strong solidarity during the height of the financial crisis, the leaders are divided now over whether to stimulate economic growth with more spending — as Obama wants — or to rein in budget deficits in light of debt crises in Greece and other heavily indebted nations.

Obama made the point that stimulus to keep the recovery going and austerity are not exclusive.

French President Nicolas Sarkozy — and to some extent Obama — agreed that budgets must be cut in the long term and that withdrawal of stimulus should be phased, said a European official familiar with the talks. Portugal, Spain and Greece need fast, strong reduction. Germany and France have more room to maneuver and can focus on spending cuts rather than tax increases, said the official, who spoke on the condition of anonymity because the official wasn’t authorized to speak publicly.

Obama argued that “the budgetary adjustment should not be too strong in Europe,” but he didn’t question the need for the adjustment, the official said.

In Toronto, hundreds of protesters vowing to set up a tent city near the summit security zone moved through city streets. Police in riot gear appeared to be holding them back and were making few arrests.

Meanwhile, outside the Chinese consulate, more than 200 Falun Gong practitioners protested the arrival of China’s President Hu Jintao.

The leaders were giving special attention this year to some unmet pledges from the past; namely, the G-8’s vow in Scotland five years ago to double international aid to Africa by 2010 and to make significant strides in providing AIDS treatment to all who need it. Neither goal has been achieved.

The G-8 held an outreach session with leaders of seven African nations.

While most attention focused on economic issues, the leaders planned an in-depth discussion Saturday of the war in Afghanistan, tensions in the Middle East and nuclear ambitions of Iran and North Korea.

The U.S. and its allies hope to persuade China to support U.N. Security Council action to hold North Korea accountable for the sinking of a South Korean warship in March.

A Japanese spokesman, Kazuo Kodama, said Friday that new Japanese Prime Minister Naoto Kan told his counterparts from Canada and Germany that North Korea’s alleged torpedo attack is a “threat to the peace and stability of the region.” Kan wants summit partners to issue a “clear message of condemnation” of North Korea, the spokesman said.

On Afghanistan, Cameron said he did not expect British troops — now numbering about 10,000 — to be in Afghanistan in five years’ time. “We can’t be there for another five years, having been there for nine years already,” he told Britain’s Sky News.

Aides traveling with the prime minister said he was not setting a deadline for the withdrawal of British troops.

On Iran, the U.S. and European nations will push other powers to join them in imposing tough new sanctions on Tehran over its nuclear program, building on new U.N. measures adopted earlier this month.

But China and Russia only reluctantly supported the sanctions, and have balked at new unilateral steps against Iran, saying any measures should not exceed those called for by the Security Council.

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