Cameron plays down spat with US over route to economic recovery

Fresh from unveiling a 40 billion package of tax rises and spending cuts in Tuesday's austerity Budget, Mr Cameron is at the forefront of calls for countries which have got deep into debt during the financial crisis to start paying off their deficits.

But the United States – which also borrowed heavily to counter the recession – is more cautious, with President Barack Obama last week warning fellow members of the G20 group of major economies not to risk stalling global recovery by cutting too soon. The US wants to keep spending to stimulate growth, amid fears of mounting unemployment and a possible double-dip recession.

In a round of television interviews as the G8 Muskoka summit began, Mr Cameron insisted that there was "no difference" between him and Mr Obama on the need for action to deal with imbalances threatening the world economy. And he stressed the US President recognised that each country must take steps which were appropriate to its national circumstances.

Countries with healthy budget surpluses, like China, can stimulate growth by boosting domestic demand, but those which have run up debts need to restore confidence by "living within their means", said Mr Cameron.

"What I want to achieve above all is to get the right outcome for the world economy and that means those countries, like our own, with big budget deficits have to move faster. Other countries with surpluses can afford to do different things.

"Dealing with those imbalances – that is what this is really about."

This year's G8 gathering is focusing on development, with Canada pushing new initiatives on child and maternal health in the poor world. The eight members, Britain, the US, France, Germany, Italy, Canada, Japan and Russia, will be joined by leaders of African countries, Haiti and Jamaica.

But Mr Cameron is putting on pressure for members to fulfil promises to double development aid made at the 2005 summit hosted by Tony Blair at Gleneagles.

He has also said he would push for action to free up international trade.

Following the conclusion of G8 talks today, the leaders will move to Toronto for a summit of the wider G20 group.

Last night, Mr Cameron held one-on-one talks with Russian President Dmitri Medvedev, at which he hopes to explore the scope for reviving relations with Moscow after years in the deep freeze.