The
first day of meetings with the world's leading economies in southern France was
plagued by continuing uncertainty over Greek and Italian debt, as G20 leaders
struggled to work through the eurozone crisis.
World leaders’ efforts to help Europe with its
debt troubles were paralyzed Thursday by uncertainty over Greece’s political
convulsions and doubts over whether Italy will enact economic reforms designed
to save it from financial disaster.
European leaders had meant to use the summit
of the Group of 20 leading economies in Cannes, France to get foreign powers
like China to help with the debt crisis that has rocked the eurozone for the
past two years and threatens to push the world economy into a second recession.
But the foggy situation in Greece - where
Prime Minister George Papandreou hopes the opposition will support an unpopular
bailout deal - and a lack of details on the eurozone’s tools to keep the debt
crisis from spreading, meant all negotiations were put on hold. Europe was
simply not ready yet.
“The first thing is for Europe to get its act
together so we have a clear picture of what Europe is proposing,” Mac Maharaj,
spokesman for South African President Jacob Zuma, told The Associated Press.
“We are very interested in a solution and we believe the solution is overdue.”
Whether such a solution would be found in
Cannes was questionable on Thursday.
President Barack Obama, sidelined at the
summit by the focus on Europe, implored European leaders to swiftly work out
details of a rescue plan, aware of the political fallout back in the United
States if they fail.
The G-20 leaders are talking about boosting
the resources of the International Monetary Fund.
“There is a broad view amongst G-20 leaders
that there does need to be additional IMF resourcing,” Prime Minister Julia
Gillard said Thursday night. “Leaders recognize that it is an appropriate move
... so people could be reassured.”
Both French President Nicolas Sarkozy and
German Chancellor Angela Merkel said that Europe needed to come up with a
credible strategy to restore confidence in their plan to save the euro,
presented just one week ago but undermined by the political turmoil in Greece.
The leaders failed, however, to spell out how they could make progress as they
themselves struggled to make sense of what was going on in Athens.
Sarkozy called Papandreou’s decision to scrap
a referendum on the rescue deal and instead aim for opposition support
“interesting,” while Merkel told journalists that it was still not clear to her
how exactly Athens would back the deal.
Last Thursday, eurozone leaders delivered what
they said was a comprehensive response to the crisis. They reached a deal with
banks to forgive Greece 50 percent of the money it owes them, while they
promised Athens an extra €100 billion ($138 billion) in rescue loans.
They also pledged to strengthen banks across
the continent and to boost the firepower of their bailout fund to as much as €1
trillion ($1.4 trillion). A stronger bailout fund is crucial because it would
protect large economies like Italy and Spain, which are too big to be rescued,
from needing financial aid.
But a week later, the deal was already in
danger of falling apart.
In Greece, the second rescue program hinges on
support from the opposition, which has so far refused to back Papandreou.
Boosting the bailout fund, meanwhile, depends
on investors from outside the eurozone to contribute money and, equally
important, on struggling countries like Italy in Spain to convince the rest of
the world that they can stabilize their economies.
Italian Prime Minister Silvio Berlusconi once
again found himself under particular pressure as his government failed to come
up with a clear and fast growth plan.
The leaders of Germany and France and top
officials from the EU, IMF and ECB held a third emergency meeting on the
sidelines of the G-20 summit planned for Thursday night to discuss the
situation.
They expect Berlusconi to make clear that “the
measures by Italy have not only been announced but will actually be
implemented,” said a European official, speaking on condition of anonymity
ahead of the meeting.
Until there is a clear commitment from Italy,
the rest of the eurozone is reluctant to finalize the overhaul of their bailout
fund, which will give it the power to insure investors against a first round of
potential losses on bonds issued by shaky countries.
The details of this overhaul, in turn, are
necessary to attract extra funding from non-eurozone actors such as the IMF and
strong emerging market economies like Brazil, Russia, India, China and South
Africa, also known as the BRICS.
“We are not in a position to make that sort of
commitment until we have a clearer idea of the content of the European
proposal,” said South Africa’s Maharaj. Similar sentiments were also expressed
by officials from China and Japan ahead of the talks in Cannes.
Russian President Dmitry Medvedev said he
hoped to be able to offer something to the eurozone. “Saving the euro is not
just in the interest of Europe but also in Russia’s interest, in China’s
interest, and other countries,” he said.
But he called Greece’s seesaw politics
“extravagant” and said they caused “headaches” for the G-20 leaders.
AP
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