If medical practice is the model for meetings of the world’s richest countries — first, do no harm — Gordon Brown may be right to call last week’s meeting a success. If you believe that promises by the G20 governments to “do whatever it takes”

to stimulate their economies are worth more than their broken promises to avoid protectionism, you might permit yourself a cheer. And if you think the International Monetary Fund, with its mixed record of bailouts, should get more money, you might applaud the decision to hand it billions more to scatter among the world’s troubled countries.

President Barack Obama leaves Europe without two things he came for. The G20 nations refused to promise to spend 2% of their GDPs in support of his economic stimulus, and the Nato nations refused to increase significantly the number of fighting men and women they will commit to Afghanistan.

All of this was predicted: Obama’s men are trying to spin the results of these meetings as presidential triumphs. The G20 did agree that some day, if their economies deteriorate further, they might then consider the stimulus that Angela Merkel and Nicolas Sarkozy have said would be ruinous. But Eliza Doolittle had it right, “Words! Words! Words! . . . Make me no undying vow. Show me now!” The G20 didn’t. And Nato members did agree to some logistic help — trainers, administrators and the like, but no soldiers.

Nevertheless, Obama can claim his star power is undimmed and that his diplomatic forays mark the dawn of a new era in relations with Europe and Asia. He did go some way toward repairing relations with Brown, praising his leadership in setting up the meeting and even using the magic words “special relationship”, though Obama believes it unites America and England, rather than the UK. And he is certain the Queen will enjoy his gift, a new (and second, it is said) iPod, loaded with, among other things, the music from Hair.

Obama then sought to press the “reset” button in American-Russian relations in a private meeting with President Dmitry Medvedev. So intent is our president on heaping blame on George W Bush that he apologised for America’s part in allowing our relations with Russia to “drift”. Never mind that Russia had cut off gas supplies to our European allies, invaded Georgia, threat- ened Poland by placing missiles on its border, and bribed Kyrgyzstan to deprive us of our last military airbase in central Asia, complicating the task of supplying Nato troops. It seems more like revanchism than “drift” to this observer.

Not to worry. All will be sorted out when Obama visits Moscow this summer and exposes Vladimir Putin and the Russian people to his star power — and his lack of enthusiasm for the missile shield needed to protect Europe from the nuclear weapons Iran is developing.

Obama then had his first meeting with his Chinese counterpart, Hu Jintao. Although this was billed as merely a get-acquainted meeting, Obama immediately agreed to two Chinese requests: that he visit Beijing, and that China be given a larger voice at the International Monetary Fund and other institutions. The small matters of human rights, North Korea’s missile launch, and China’s recent proposal to have the dollar replaced as the world’s reserve currency did not come up. The presidency of the World Bank, traditionally reserved for an American, did, and the communiqué suggests that Obama gave up that privilege, no quid pro quo required.

The Chinese and the Americans know they have to do a deal. China has to stimulate domestic demand to be less reliant on exports, and America has to increase domestic savings to be less dependent on China’s purchases of US Treasury bonds and notes. Obama’s problem is that the huge deficits called for in the budget, provisionally approved by Congress on Thursday, will require the printing of lots of new dollars, lowering the value of the trillion or so American IOUs in China’s vaults.

Last week China took its call for the development of alternatives to the dollar as a reserve currency one step further: it announced a series of deals to accept payment in a variety of other currencies. Obama has only one card to play in the upcoming negotiations: protectionist measures that would make it more difficult for the Chinese to sell their goods in America. Neither member of the G2 wants to see such a deterioration in economic relations. Let’s hope Bob Zoellick, president of the World Bank, is right to predict that a long process of recognition of mutual interests is now under way between the G2.

While the heads of state took their televised bows, the real world of markets was signalling a possible pick-up in economic activity — what Americans, borrowing from Britain, now call “green shoots”. Factory orders rose 1.8% in March, the first increase in seven months, and all new orders jumped 8%. Carmakers, headed towards some form of bankruptcy if observers are reading Obama’s hints correctly, report that although sales dropped in March, they remained well above February’s level (23% up, in the case of GM). More important, demand was way up during the last week in March, partly in response to “incentives” — the polite term for discounts — that averaged more than $3,000 per vehicle.

The troubled housing market also flashed mixed signals, and mixed signals are a considerable improvement over uniformly gloomy ones. Sales of existing homes are showing signs of strength, and mortgage applications are up. The index of pending sales — deals for which contracts have been signed but not completed — rose by 2.1% in February, perhaps in response to falling home prices that, combined with low 4.6% rates on 30-year mortgages, have made homes more affordable to more people.

No, the recession is not over, even though the stock market seems to think it might be. The job market remains weak. Some 5m jobs have been lost since the recession started, 663,000 jobs disappearing in March alone. The unemployment rate has risen to 8.5% and may be headed higher. But the gloom is no longer unremitting.

Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute

stelzer@aol.com

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