Published: Jun 25, 2010 1:41 PM EDT
Updated: Jun 25, 2010 10:42 AM EDT

TORONTO (AP) - World leaders, facing serious differences over

the best way to nurture a fragile global recovery, are agreeing to

disagree in a variety of key areas.

Even before the economic talks were to begin over lunch Friday,

the leaders engaged in a series of dueling letters and interviews

that exposed their conflicts.

The three days of talks were starting at a lakeside resort north

of Toronto where the Group of Eight countries - the United States,

Japan, Germany, France, Britain, Italy, Canada and Russia - will

discuss proposals to increase support for maternal and child health

care in poor nations and hold an outreach meeting with leaders of

seven African nations.

The G-8 will also spend time exchanging views on hot-button

issues, such as Iran's nuclear program and possible sanctions on

North Korea following the sinking of a South Korean warship.

President Barack Obama, following a tough two months dealing

with the worst offshore oil spill in U.S. history, was arriving

with a mixed record of persuading his own country's Congress to

follow his ideas.

On Thursday, solid Republican opposition caused the defeat of

legislation that would have provided billions of dollars for job

creation and extended benefits for unemployed people. But in a win

for the president, House-Senate bargainers shook hands before dawn

Friday on a sweeping overhaul of financial regulations aimed at

preventing the next worldwide economic swoon.

So far, world leaders have not signaled much support for Obama's

cautionary warnings that countries should not pull back their

stimulus efforts too quickly.

Britain, Germany, France and Japan have all unveiled

deficit-cutting plans. Canadian Prime Minister Stephen Harper, the

host for the summit meetings, was urging the countries to agree to

concrete deficit-reduction goals as a way of restoring investor

confidence following the turmoil caused by the Greek debt crisis.

Asked about the disputes over stimulus spending versus deficit

reductions, Canadian Finance Minister Jim Flaherty said, "One size

doesn't fit all."

The countries were also struggling to resolve major differences

over reform of the financial system, including setting tougher

standards for bank capital, the cushion banks must hold to cover

losses, and over whether countries should impose taxes on banks to

reimburse taxpayers for the bank bailouts and to build up funds to

cover future bailouts.


Toronto was braced for the potential of disruptive protests that

so far have not materialized.

Toronto's downtown core resembled a fortress with a big steel

and concrete fence erected over several blocks to protect the

summit site. Canadian police patrolled the Lake Ontario waterfront

from boats and jet skis. The number of security forces protecting

the summit meetings was estimated to total 19,000, drawn from all

over Canada.

The G-20 leaders' summits began in the fall of 2008 in response

to the global economic crisis that struck with fury after the

collapse of Lehman Brothers, a major U.S. investment bank.

At that time, the leaders joined to assemble multibillion-dollar

support packages to restart economic growth and financial rescue

efforts to rescue a froze global banking system.

But now that the banks are back from the brink and the world's

economies are growing again, unity is proving more elusive.

Obama sent a letter last week warning that removing the massive

government stimulus spending too quickly could represent a repeat

of the disastrous mistakes of the 1930s that prolonged the Great


But Harper sent out his own letter urging establishment of firm

deficit reduction goals.

Some leaders didn't appreciate being lectured by Obama on the

need for countries running trade surpluses, which would include

China, Germany and Japan, to do more to boost domestic spending to

help the global economy while U.S. consumers, long the driver of

global growth, begin to save more.

"German export successes reflect the high competitiveness and

innovation strength of our companies," German Chancellor Angela

Merkel said in an interview published in The Wall Street Journal.

"Artificially reducing Germany's competitiveness would be of no

use to anyone."

Britain, Japan and, unexpectedly, Australia were sending new

leaders to the G-20 summit. Australia's ruling Labor Party abruptly

ousted Prime Minister Kevin Rudd. Julia Gillard replaced him,

becoming Australia's first female leader. Wayne Swan, her new

deputy and the country's finance minister, was to represent

Australia at the Canadian meetings.

It will be the first appearance at the G-20 table for British

Prime Minister David Cameron and Japanese Prime Minister Naoto Kan.

And both were bearing deficit-cutting messages.

Cameron comes after his Conservative government unveiled an

emergency budget Tuesday that contained higher taxes and the

toughest cuts in public spending in decades. And Kan said this week

that deficit reduction would be his top agenda item at the Canadian

meetings and that Japan would soon start debating a possible sales

tax increase to rein in the nation's bulging deficits.

Both are trying to avoid Greece-style government debt crises.

Talking to reporters on the flight from London, Cameron sought

to play down any differences with the United States.

"This weekend isn't about a row over fiscal policy. We all

agree about the need for fiscal consolidation," he said. "This is

about putting the world economy on an irreversible path to


After the G-8 discussions in the Muskoka lake region of Canada,

Obama and the other G-8 leaders will reconvene in Toronto for the

G-20 summit.

The larger group of nations, including such major developing

powers as China, Brazil and India, will begin discussions over

dinner Saturday night and will wrap up after further talks on


The G-20 final statement expected to be issued on Sunday notes

that "while growth is returning in many countries, the recovery is

uneven and fragile, and unemployment remains at unacceptable

levels," according to an early draft that the environmental group

Greenpeace said it obtained.