There are two items on the G8 agenda in l’Aquila Italy this week — climate change and exiting fiscal stimulus (that is, reducing deficits).

The trouble is that the United States needs more stimulus, not less, and China is stockpiling coal and building two power stations a week.

So the world’s two most powerful nations are heading in the opposite direction to that which the G8 Italia 2009 communiqué drafters will write. It seems likely that Presidents Obama and Hu will sign a bland communiqué and then head off home to do what they have to do.

The American labour market is gradually unravelling. It’s not just that 467,000 jobs were lost in May, but the working week fell to a record low of 33 hours — down 6.9 per cent from a year earlier. The real unemployment rate, according to the Center for Labor Market Studies at the Northeast University in Boston, is 18.2 per cent, not 9.5 per cent as announced, and “underemployment” of the nation’s teens is 38.2 per cent (also a problem in Australia). Among blacks it is a horrifying 53.7 per cent.

Wages are now falling at the rate of 1.6 per cent a year. Paul Krugman, who is pushing for further stimulus, wrote on Saturday that America is “heading into Japanese-style deflation territory”.

With the cash rate already at zero, unless there is a spontaneous recovery in consumer confidence and spending, President Obama has no choice but to further increase the deficit and apply more stimulus.

Yet G8 2009 is supposed to be about exit from rescues, not more rescues. The German Chancellor, Angela Merkel, has flagged that she will press for this week’s G8 meeting to start preparing plans for reducing fiscal stimulus, and President Hu Jintao of China wants to raise the matter of a new global reserve currency, because China is worried about the US dollar, as well it might be.

And this week’s key agenda item — climate change — is already beginning to fail.

It is being reported this morning that climate change ministers have met four times to prepare for this week’s G8 summit, but have got nowhere. They meet again tomorrow, on the eve of the summit, in a last ditch effort to come up with a workable framework for something concrete on Wednesday in Italy.

An agreement is needed this week among the G8 to provide leadership and maintain some momentum for the big post-Kyoto meeting in Copenhagen in December.

Meanwhile, according to a new study by the Netherlands Environmental Assessment Agency, China is now the world’s largest CO2 emitter, having passed the US in 2008.

Global emissions increased by 1.7 per cent in 2008 — half the rate of increase in 2007. But China accounted for 45 per cent of the increase. In general, developing countries make up more than half of the global emissions now — for the first time.

But the problem of global warming is the result of the development of the developed nations — burning fossil fuels and emitting CO2 when no one knew it was dangerous.

And while China’s per capita emissions are now growing more quickly than most, they are still at just 5.7 tonnes per head of population, compared with 18.5 tonnes for the US and 18.3 tonnes in Australia.

And China is still building two power stations a week and is also building huge coal stockpiles at its major ports because it has a persistent shortage.

The result is that all high-level climate change discussions now focus on money — how much of it the developed nations will pay in compensation to the developing nations for reducing their reliance on cheap fossil fuels.

It is a discussion between the bankrupt and the impoverished.