G20 deal at risk as US-Europe rift grows

• Germany and France resist call for new fiscal stimulus
• Obama's treasury cause of inaction, says UK official

Patrick Wintour, Nicholas Watt and David Gow in Brussels
The Guardian, Wednesday 11 March 2009

Gordon Brown's hopes of achieving a deal on the international handling of the financial crisis in London next month have been dealt a blow by signs of a growing split between America and Europe, and an admission by Britain's most senior civil servant that it is very hard to get decisions from the Obama administration.

America's idea of another co-ordinated fiscal stimulus to lift the world out of recession is being resisted by Germany and France, both worried by the scale of their projected public deficits.

The faultline was becoming visible as Sir Gus O'Donnell, head of the UK civil service, said the US treasury secretary, Tim Geithner, had told him there was no one in the US treasury department because of delays in appointing a new administration. "There is nobody there," he told a civil service conference in Gateshead. "You cannot believe how difficult it is."

Sir Gus made his remarks in defence of a permanent civil service, pointing out that he had known Geithner for many years, but had been unable to get decisions from the administration.

The lack of a heavyweight US treasury administration nearly two months after the inauguration is especially alarming at a time of global economic meltdown.

The remarks appeared on a government website but were taken down shortly afterwards - even though the government accepted they had been made.

Sir Gus criticised the US system of new administrations appointing their own senior civil servants, saying it would be "absolute madness" to introduce similar rules here. He said: "If there's a change of administration, you're out, and a whole new bunch of people come in who probably haven't been in government before."

The prime minister's spokesman said the quotes had been taken out of context and insisted Gordon Brown had found the White House fully engaged when he visited last week. He said: "We have very good relations with the Obama administration on the G20 and other issues, as shown by the very substantive discussions we had with President Obama and his team last week."

Washington newspapers have reported for some time that the US treasury was making slow progress in building an administration, leaving its few officials overstretched. Every key post below Geithner is still to be confirmed.

There are also concerns that the US administration is starting to diverge from Europe on key aspects of the G20 agenda, with the US placing greater emphasis on a larger co-ordinated fiscal stimulus, and mainland Europe putting the emphasis on new regulatory structure, action on tax havens and executive bonuses.

Larry Summers, the US treasury secretary, at the start of the week called for further fiscal stimulus from Europe, but was rebuffed by senior European politicians who insisted they had done enough.

At a meeting of EU finance ministers yesterday, Peer Steinbrueck, Germany's finance minister who has been heavily criticised for Berlin's "miserly" €50bn plan over two years, said there was "significant bewilderment" at the demands by Summers.

http://www.guardian.co.uk/politics/2009 ... nistration