Home Economic World leaders back Biden G7 call for more economic stimulus

World leaders back Biden G7 call for more economic stimulus

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Joe Biden has won support at the G7 summit for a “carry on spending” plan, as western leaders rejected austerity in a post-Covid world and vowed to tackle inequality at home and abroad.

Biden’s call for continued economic stimulus was backed by fellow leaders at the summit in Cornwall in south-west England, in a gathering framed by leaders as the moment the west starts a fightback against an ascendant China.

The US president opened the first session of the summit at Carbis Bay and — according to one witness — was backed by all G7 leaders as he called on the west to “meet the moment and support the economy”.

Mario Draghi, Italy’s prime minister and former head of the European Central Bank, followed Biden and declared: “There is a compelling case for expansionary fiscal policy.”

Draghi argued it was right to spend now, even if western countries had to commit to longer-term fiscal prudence to reassure markets and to ensure central bankers did not take fright and excessively hike interest rates.

In a declaration that summed up the west’s apparent conversion to social democracy, summit host Boris Johnson said it was vital the pandemic did not cause a “lasting scar” of inequality.

Opening the summit, he said: “It is vital that we don’t repeat the mistakes of the last great crisis, the last big economic recession of 2008 when the recovery was not uniform across all parts of society.”

Britain’s Conservative prime minister has previously described the austerity policies adopted by the government of David Cameron, his predecessor, as “a mistake”.

Johnson also said the recovery should be built with the environment in mind and in “a more gender-neutral and more feminine way”.

Although G7 commitments are not binding, the west’s appetite for fiscal expansion sets the scene for some awkward discussions this autumn between Johnson and his fiscally conservative chancellor Rishi Sunak.

The G7 countries will use the summit to commit to higher spending to help the developing world, with a clear message that the west offers an alternative to the support offered by Beijing.

The leaders agreed to supply 1bn vaccine doses to poorer countries, which comes in response to China’s “vaccine diplomacy”. The US has claimed Beijing offers its medical help with “strings attached”.

The G7 will use weekend meetings to discuss a plan to help poor countries tackle climate change, a capital investment programme styled by some British officials as a counterweight to China’s Belt and Road global infrastructure programme.

Meanwhile the summit will endorse plans for a new system for taxing the biggest multinational companies, although there is still a dispute over exactly which firms should come under its scope.

US president Joe Biden and France’s Emmanuel Macron walk together beside the sea at the G7 summit © Phil Noble/Reuters

Biden does not want an excessive burden on US tech companies, while Britain is fighting to exclude big banks. “The US does not see a conceptual basis for financial services exclusion,” a US Treasury official said.

After four years of Donald Trump’s presidency, when the G7 became a dismal forum for division and rancour, the mood on the Cornish coast was decidedly upbeat at the start of the three-day summit.

Emmanuel Macron, French president, threw his arm around Biden — on his first overseas trip as US president — on the Carbis Bay beach and discussed the need for democracies to work for “the middle classes”.

Meanwhile Canada’s Justin Trudeau — who had earlier warned that austerity programmes had contributed to the rise of populism — was among those taking a dip in the sea.

On Friday evening the G7 leaders and partners travelled to the Eden Project, a futuristic environmental park, to meet Queen Elizabeth and other members of the royal family. On Saturday a beach barbecue is planned.

The summit continues on Saturday with a further discussion on the economy, foreign policy and health; it concludes at lunchtime on Sunday after a discussion on tackling climate change.