June 17, 2013

G8 faces uncertain recoveries, turbulent markets

By David McHugh and Shawn Pogatchnik / The Associated Press

ENNISKILLEN, Northern Ireland — Europe is mired in debt and recession. Financial markets have hit violent ups and downs on fears that U.S. stimulus efforts may soon be scaled back. Japan is finally looking up after years of stagnation — but it remains an open question if the recovery will stick.

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President Barack Obama, first lady Michelle Obama, and daughter Malia walk to Marine One on the South Lawn of the White House in Washington on Sunday, as they head to Northern Ireland for the G-8 Summit.

AP

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That's the global economy that confronts the heads of the Group of Eight leading economies as they gather Monday and Tuesday for their annual summit in Northern Ireland.

British Prime Minister David Cameron will serve as summit host for U.S. President Barack Obama and the leaders of Germany, Italy, Canada, France, Japan and Russia. At the top of the agenda: New cooperation to fight tax evasion and increase transparency among governments. Also on the table will be how much help to give to rebels in Syria, and a push for lower trade barriers between the United States and the European Union.

On the sidelines and over dinner, it's expected that the discussions will broaden to include the election results in Iran and data protection, following revelations about a U.S. counterterror surveillance program.

As always, the summit takes place under heavy security, guarded by 8,000 police backed by water cannon. The venue itself is surrounded by extensive security fences, and on three sides by water. There's only one access road to the closest town, Enniskillen, some 5 miles (8 kilometers) away.

While its peace process has been hailed worldwide as a success story, Northern Ireland remains a society troubled by deep-seated divisions between Catholics and Protestants. Officials have said trouble away from the summit site can't be ruled out. Additionally, thousands of anti-capitalist and labor union protesters are expected to march from the town to the summit fence on Monday.

Since last year's G-8 meeting at Camp David in the U.S., there has been a modest economic upswing throughout the developed world and prospects are brighter after five years of turbulence and recession. Yet despite progress, the economic outlook remains fraught with uncertainties.

Chief among the question marks: When will the U.S. Federal Reserve begin to curtail its extraordinary stimulus, which has supported the recovery in the U. S. and helped send markets around the world to new peaks? Global stock and bond markets have whipsawed since May 23, when U.S. Fed Chairman Ben Bernanke said that the U.S. central bank might slow its drive to keep long-term borrowing costs low in the coming few months.

Here is a quick picture of where the G-8 countries' economies stand:

UNITED STATES: If Europe is the weak link and Asia the strongest, then the U.S. and Canadian economies are squarely in the middle. The two countries are experiencing steady, if not spectacular, economic growth and job gains.

In the U.S., the once-battered housing sector has been recovering for the past year. Home sales have reached three-year highs. And prices have jumped this spring by the most in seven years. That has encouraged builders to start work on more homes.

The unemployment rate has fallen to 7.6 percent from 8.2 percent a year earlier.

For all the G-8 participants, the most unsettling shift is the possible end of massive monetary stimulus from the Fed — a factor beyond their immediate control. The Fed's injections of money into the economy through bond purchases — known as quantitative easing — had helped send markets soaring.

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