Business

G20 summit: Fractious talks resume amid debt crisis

  • 19 June 2012
  • From the section Business

World leaders are resuming talks at the G20 summit in Mexico after a day of tense words over Europe's debt crisis.

On the second and last day of the summit, they are expected to release a statement declaring unity over efforts to create jobs and boost growth.

They have urged European action to overcome the eurozone debt crisis.

The talks are being held as talks on a coalition government in debt-ridden Greece have yet to yield an outcome and Spain's borrowing costs soared.

Rates on some Spanish government bonds were about a third higher than last month, reaching just over 5%.

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.

However, the Brics economies (Brazil, Russia, India, China and South Africa) pledged to increase their contributions to the IMF - the fund has been seeking to boost its finances to prevent any future financial crisis.

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.

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

'Lack of progress'

Officials at the summit are putting the finishing touches to the final statement.

A draft seen by the Associated Press news agency says eurozone G20 members have pledged to "take all necessary policy measures to safeguard the integrity and stability of the area".

Correspondents say there is a focus on job creation including through government spending as opposed to budget cuts and austerity.

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".

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".

But European Commission head Jose Manuel 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."

Merkel rejects bailout change

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.

* 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.