Last chance for G20 to show leadership
FEELINGS are likely to run very high today when Greek Prime Minister George Papandreou meets his French and German counterparts in Cannes to discuss his unexpected decision to call a referendum on the deal agreed last week.
Caught unawares by Mr Papandreou's gamble, the French and Germans summoned him to crisis talks ahead of tomorrow's Group of 20 summit, which will gather together the world's leaders to discuss the world economy. This means the G20 crisis talks will effectively start one day early, as Germany's Angela Merkel and France's Nicolas Sarkozy will also meet with European officials and International Monetary Fund representatives.
EU officials had hoped to use last week's rescue agreement, which includes renewed commitments to fiscal austerity as well as new rescue resources, to anchor their economic agenda at the G20 summit.
Now, officials meeting as the confidence vote plays out in Athens will be called on to assess the deal's -- and the euro's -- future, especially if Mr Papandreou's government falls and Greece comes under more pressure to default or leave the euro.
The G20 was created in 2009 as the steering committee for the world economy and earned its spurs by coordinating a fiscal stimulus to cushion the blow of the global financial crisis.
But two years on, the latest unforeseen twist in Greek politics risks relegating the G20 to a group of bystanders. The imperative now for tomorrow's summit is to erect a firewall around Greece, to prevent its debt woes spreading to more important economies such as Italy, and twin that with a plan to boost growth, said Paola Subacchi, director of international economics at Chatham House, a London think tank.
"The most important thing that the G20 has to focus on is how to provide a financial safety net which is extensive and deep," she said.
"People are fed up that there is a sense of no leadership. The G20 needs to restore confidence by sending a message that yes, we know what we're doing; yes, we are in charge."
The G20 had hoped that China and other big emerging economies in the G20 would make firm financial commitments to the eurozone's rescue fund but that now seems impossible. (Additional reporting Bloomberg and Reuters)