Leaders differ on how to nurture a global recovery

HUNTSVILLE, Ontario (AP) - Fresh from a congressional win on a financial overhaul, President Barack Obama pressed world leaders on Friday to join him in backing stronger rules against banking abuses. He made little headway in his call for more stimulus to keep the world economy growing.

Instead, he ran into strong opposition from countries wanting to put deficit reduction first.

"Those countries with budget deficits need to do that and, as a world, we need to address the imbalances," Britain's conservative new prime minister, David Cameron, said Friday after meeting summit host Stephen Harper, Canada's prime minister. His government brought forward an emergency budget this week that proposed increased taxes and the toughest cuts in public spending in decades.

As Obama and other leaders sparred over how to keep their economies from slipping back into recession, there was little expectation of economic breakthroughs from sessions here and in Toronto.

Divided on economic remedies, the leaders searched for common ground on other issues, such as confronting nuclear standoffs with Iran and North Korea, dealing with the AIDS epidemic, and maternal and infant health care in desperately poor countries such as Afghanistan, Mali and Tanzania- a key project of Harper's.

Harper announced late Friday that leaders of the so-called Group of Eight major industrial democracies - the U.S., Canada, Britain, Germany, France Japan, Italy and Russia - had pledged to contribute $5 billion over the next five years to the initiative.

He said Canada's contribution was $1.1 billion and U.S. aides said the U.S. share was about the same.

He was asked at a news conference why he thought the G-8 would honor this commitment when it hadn't honored many past ones. "Because of the tight budgetary situation we are seeing in many countries, leaders are being very cautious as to the pledges they have made," he said. "I'm confident that money will be delivered."

The eight-nation group met at a resort in Canada's sprawling Muskoka region of lakes and vacation cottages several hours drive north of Toronto. On Saturday and Sunday, the focus shifts to Toronto, where their number will grow to 20 as they are joined by leaders representing fast-growing developing economies including China, India and Brazil.

At a time when leaders were discussing fiscal austerity, Canada's Harper has come under criticism over the projected costs of the summits, including at least $900 million for security and $2 million for a theme park inside the media center that includes an artificial lake with canoes, deck chairs and a fake dock.

The Group of 20 has been gradually overshadowing the Group of Eight as the world's premier forum for discussing and coordinating economic policy.

Obama was able to claim a big victory in Washington early Friday as congressional negotiators reached a hard-fought compromise on new Wall Street banking rules. He urged other countries to follow suit. "We need to act in concert for a simple reason," Obama said as he left the White House. "This crisis proved and events continue to affirm that our national economies are inextricably linked."

Some leaders congratulated Obama at the opening G-8 lunch session for tightening financial regulations, U.S. aides said.

A Cameron spokesman said Britain welcomes the U.S. steps and is at work on its own measures "to ensure the future resilience of the financial sector."

Obama's call for more temporary stimulus spending was being rebuffed by leaders in Europe and Japan who instead emphasized cutting government spending and even raising taxes, much as he's been stymied at home on his pleas to Congress for more jobs and stimulus money.

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.

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.

Russia's bid to join the World Trade Organization - for which Obama voiced strong support on Thursday after a meeting in Washington with Russian President Dmitry Medvedev - could also come up. Obama pledged to help Russia speed up its more than decade-long bid in hopes that Moscow could win acceptance as early as Sept. 30.

The G-20 group represents 85 percent of the world economy and the United States wants this group to endorse the outlines for a global financial overhaul to eliminate the threat that banks facing tougher regulations in one jurisdiction will move their operations to countries with more lax rules.