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G20 summit: Leaders alarmed over eurozone crisis

  • 19 June 2012
  • From the section Business
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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.

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".

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.

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.

* 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.