Analysts say the G20 summit in Cannes was a failure for the European leaders.
By Svetla Dimitrova for Southeast European Times in Sofia -- 05/11/11
The two-year-old Eurozone debt crisis could push the global economy into recession. [File]
A two-day G20 summit ended in the French Riviera resort city of Cannes on Friday (November 4th) with broad promises for continued co-operation in addressing the economic challenges facing the world today.
"Today, we reaffirm our commitment to work together and we have taken decisions to reinvigorate economic growth, create jobs, ensure financial stability, promote social inclusion and make globalisation serve the needs of the people," the G20 leaders in their final communiqué.
At the start of the meeting on Thursday, US President Barack Obama said that the most important aspect of the talks was tackling the two-year-old Eurozone debt crisis that is threatening to push the global economy into recession.
On that critical issue, however, the leaders of the 20 major economies that together account for more than four-fifths of the global output, failed to make much headway.
They reportedly discussed various options for scaling up the IMF's resources to allow it to move quickly to provide assistance to crisis-hit members.
One of the objectives of that measure would be to secure sufficient funding for preventing the Eurozone debt crisis from spreading to the 17-nation club's third- and fourth-largest economies, Italy and Spain.
After failing to agree on a specific scheme for increasing the Fund's firepower, the G20 leaders only vowed that they would "ensure the IMF continues to have resources to play its systemic role to the benefit of its whole membership".
Hopes are now that the finance ministers will be able to reach a deal on that at their next meeting in February.
IMF Managing Director Christine Lagarde was not very optimistic, however, noting that many of the institution's members had yet to pay the additional contributions they agreed to back in 2010.
"There is a still a long way to go. I'd like to see my money," the former French finance minister said.
At a summit last week, the EU agreed to beef up the powers of the European Financial Stability Facility (EFSF), the Eurozone's rescue fund, to at least 1 trillion euros to prevent the debt crisis from spreading across the 17-nation club. European leaders' hopes that other G20 members would offer additional financial support to the facility during the Cannes meeting did not materialise.
The meeting was overshadowed by developments in Greece, following Prime Minister George Papandreou's surprise announcement last week that he would call a referendum on his country's latest bailout deal, just days after its approval by the Eurozone leaders.
The news shocked European leaders and sent markets into panic. Papandreou and Greek Finance Minister Evangelos Venizelos were summoned to Cannes on Wednesday. While Athens officially abandoned the referendum idea the following day, ahead of a late-night vote of confidence in the prime minister on Friday, the political crisis in the country dominated behind-the-scenes talks in Cannes.
The G20 summit also failed to allay concerns that Italy could now become the Eurozone's next "Greece".
Under pressure from other EU nations and financial markets, Italian Prime Minister Silvio Berlusconi "invited" the IMF to monitor, along with the European Commission, his country's progress in implementing long delayed social and economic reforms.
"We support the measures presented by Italy in the Euro summit and the agreed detailed assessment and monitoring by the European Commission," the G20 leaders said in their communiqué. "In this context, we welcome Italy's decision to invite the IMF to carry out a public verification of its policy implementation on a quarterly basis."
That move, according to Daniel Gros, director of the Centre for European Policy Studies, was "a slap in the face of the Commission, which should normally be doing this kind of work" on its own.
The talks in Cannes were "a complete failure" for the Europeans, the head of the Brussels-based think-tank, told SETimes on Friday.
"The Europeans promised that they would arrive at the summit with a package to solve the Eurozone [crisis] and they arrived at the summit with the Eurozone crisis being worse than before," he said.
Former Bulgarian Finance Minister Plamen Oresharski was less critical in his comments on the G20 summit. Nothing "dramatic" came out of it, he told SETimes on Saturday, viewing the agreements reached at the EU summit last week as "far more important"
"The summit in Cannes just reconfirmed already established instruments," he added, stressing that there are no "magic" mechanisms to deal with the current problems in the Eurozone.