G20 summit: Leaders alarmed over eurozone crisis

 

Jose Manuel Barroso: "This crisis was not originated in Europe"

World leaders meeting at a G20 summit in Mexico have urged Europe to take all necessary measures to overcome the eurozone debt crisis.

They voiced unease over what one top official described as "the single biggest risk for the world economy".

But European Commission President Jose Manuel Barroso said "the challenges are not only European, they are global".

Sunday's victory of a pro-bailout party in the Greek election did not give stock markets the expected boost.

Antonis Samaras, the leader of the New Democracy party, which narrowly won the poll, is holding urgent talks to form a coalition with the socialist Pasok party and possibly the smaller Democratic Left party.

Start Quote

Frankly, we are not coming here to receive lessons in terms of democracy ”

End Quote Jose Manuel Barroso European Commission President

Mr Samaras earlier reiterated that he would "have to make some necessary amendments" to the terms of the bailout agreement reached with the European Union and International Monetary Fund (IMF), "in order to relieve the people of crippling unemployment and huge hardships".

But German Chancellor Angela Merkel appeared to dismiss the idea.

"The new Greek government has to implement the commitments entered into by the country. The programme framework has to be kept," she said.

'Unorthodox practices'

On Monday, many world leaders expressed alarm in Los Cabos at what they saw as a lack of progress in dealing with the eurozone crisis.

World Bank chief Robert Zoellick said: "We are waiting for Europe to tell us what it's going to do."

Meanwhile, Jose Angel Gurria, the Mexican head of the Organisation for Economic Co-operation and Development (OECD), said the crisis was "the single biggest risk for the world economy".

Analysis

The mantra at this G20 summit may be that everyone needs to pull together to avoid a global slowdown, but there is plenty of veiled acrimony.

For those outside the eurozone, the verdict is that the crisis there is alarming and its leaders need to do whatever it takes to end it.

A touch defensively, the President of the European Commission Jose Manuel Barroso said he had not come to G20 to be given lessons. The President of the European Council, Herman Van Rompuy, added that while Europe might have internal weaknesses to correct, other countries had their own imbalances and unfulfilled promises.

This was partly a nod to the new IMF bailout fund. Ahead of this summit, Brazil, Russia, China and Mexico all pointedly failed to commit to their pledges and some of them hinted that Europe could hardly expect them to dig deep into their pockets without a quid pro quo - making good on promised reforms to allot them more voting rights at the IMF's top table.

Pascal Lamy, the head of the World Trade Organization (WTO), warned about the danger of contagion from the eurozone crisis.

He said that global volatility and uncertainty was fuelling a trend towards protectionism, which was not only stalling free trade but starting to reverse it.

Canadian Prime Minister Stephen Harper called on eurozone leaders to make structural changes to solve the debt crisis.

But Mr Barroso mounted a strong defence of the EU's handling of the crisis so far.

Asked by a Canadian journalist to explain why North Americans should "risk their assets to help Europe", he replied: "Frankly, we are not here to receive lessons in terms of democracy or in terms of how to handle the economy.

"This crisis was not originated in Europe... seeing as you mention North America, this crisis originated in North America and much of our financial sector was contaminated by, how can I put it, unorthodox practices, from some sectors of the financial market."

The President of the European Council, Herman Van Rompuy, said a draft G20 communique showed "support and encouragement for the euro area countries and leaders and for the European Union as a whole to overcome this crisis".

Protectionism

The BBC's Andrew Walker says that while Europe is clearly the big danger, there are also problems elsewhere in the world's major advanced and emerging economies, starting with the two largest national economies, the US and China.

The slowdown in India is something else for the G20 to fret about at the Mexican resort of Los Cabos, our correspondent adds.

A draft of the statement to be released on Tuesday is expected to call for a co-ordinated global plan for job creation and growth, reports say.

Start Quote

President Obama's message will be that the financial storm clouds are still hovering, and the risks of yet another global slowdown are all too real”

End Quote

And if growth weakens, the proposed document says, countries without heavy debts should "stand ready to co-ordinate and implement discretionary fiscal actions to support domestic demand", according to Reuters.

In a separate development, China pledged $43bn (£27bn) to the IMF's crisis intervention fund, which has almost doubled to $456bn (£366bn).

The move comes after a meeting of the Brics group of emerging economies - Brazil, Russia, India, China and South Africa. The five nations all offered to contribute $10bn (£6.4bn) to the IMF each in exchange for voting reforms that would give them greater influence in the organisation.

Meanwhile, Russian President Vladimir Putin called for rules to allow protectionism for countries facing a financial crisis.

"It is time to stop pretending and come to an honest agreement on the acceptable level of protectionist measures that governments can take to protect jobs in times of global crisis," he said.

"This is particularly important for Russia as our country will join the WTO this year and we intend to take an active part in the discussions on the future rules for global trade."

BBC diplomatic correspondent Bridget Kendall says that for a forum which has always loudly claimed that free trade is the engine of growth Mr Putin's call is little less than heretical.

US President Barack Obama had earlier talked about the importance of avoiding protectionism, which is the process of making imports more expensive to protect domestic jobs.

G20: How their economies are faring

Country Growth (% GDP change, 2010-11) Unemployment (% 2011) External debt (% GDP, end of 2011)

Source: Principal Global Indicators

Argentina flag

Argentina

8.9

7.5

7.6

Australia flag

Australia

2.2

5.1

86.6

Brazil flag

Brazil

2.7

6

17.2

Canada flag

Canada

2.4

7.5

70.2

China flag

China - mainland

n/a

4.1

n/a

EU flag

European Union*

1.5

10.1**

120.0

French flag

France

1.7

9.3

191.2

Germany flag

Germany

3

6.5

159.4

India flag

India

6.9

n/a

17.2***

Indonesia flag

Indonesia

6.5

6.6

26.5

Italy flag

Italy

0.4

8.4

115.1

Japan flag

Japan

-0.7

4.6

52

Mexico flag

Mexico

3.9

5.2

26.1

Russia flag

Russia

4.3

6.6

27.7

Saudi Arabia flag

Saudi Arabia

6.8

n/a

n/a

South Africa flag

South Africa

3.3

24.9

29.4

South Korea flag

South Korea

3.6

3.4

34.9

Turkey flag

Turkey

8.5

9.8

42.7

UK flag

UK

0.9

8.1

421.9

US flag

US

1.7

9.0

98.2

* Euro area only, ** 2010 figs, *** Q3 2011. Note: External debt refers to debt owed to creditors outside the country. Countries with active financial sectors, such as the UK, tend to have large amounts of external debt.

 

More on This Story

Global Economy

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +2

    Comment number 617.

    Our system of politics needs to be changed.
    The way it is today only allows big people to make small decisions in the hope for mediocre benefits only in the near future.

  • rate this
    +2

    Comment number 600.

    I've said it a million times & I'll say it again; this crisis belongs to the world & not to Greece, Spain, Italy, Ireland etc. So it has got to be solved on a world basis, with all the world's major banks/governments being involved. If we don't fix the world economy & start soon, then the problem will be unfixable. Also, austerity on it's own is a fools game, it won't work in a world "Depression"!

  • rate this
    +1

    Comment number 584.

    The elephant in the room. Jobs. Bring jobs back to the Western world. There is no other way. this balance needs to be addressed. The west is a massive shopping mall for goods produced elsewhere.

  • rate this
    +3

    Comment number 374.

    I hardly believe any country is in a position to lecture "Europe". The US can't even agree on raising their already monstrous debt ceiling. If you look at the major economies in Europe, they are not doing any worse than the US or the UK in the grand scheme of things. Budget consolidation is the only long-term approach to solving the problem - not just hiding symptoms like everyone seems to suggest

  • rate this
    +3

    Comment number 276.

    I'm not surprised. We must all be fearful of a crisis so comprehensively mis-managed by people who have been democratically elected as national leaders, and who are forever trying to postpone the inevitable.

    Why don't they have the courage to face up to the seriousness of the situation and make the really difficult decisions now, rather than merely arranging summit after summit?

 

Comments 5 of 10

 

More Business stories

RSS

Features

  • Shinji Mikamo's father's watchTime peace

    The story of the watch that survived Hiroshima


  • Northern League supporters at the party's annual meeting in 2011Padania?

    Eight places in Europe that also want independence


  • Elephant Diaries - BBCGoing wild

    Wildlife film-makers reveal the tricks of the trade


  • Hamas rally in the West Bank village of Yatta, 2006Hamas hopes

    Why the Palestinian group won't back down yet


  • A woman dining aloneTable for one

    The restaurants that love solo diners


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.