World leaders pressure Europe to resolve crisis
by Daniel Mason
World leaders have called on Europe to do all it takes to stem the eurozone crisis – even as European Commission President José Manuel Barroso insisted he would not "take lessons" on dealing with the economy.
At a G20 summit in Mexico, emerging economies including China increased their contributions to the International Monetary Fund's financial firewall, as efforts to deal with the crisis were stepped up.
A series of figures lined up to emphasise the importance of solving Europe's problems. Angel Gurría, secretary general of the Organisation for Economic Cooperation and Development, said the eurozone represented the "single biggest risk for the world economy", while the head of the World Bank, Robert Zoellick, noted that everyone was "waiting for Europe to tell us what it's going to do". Pascal Lamy, head of the World Trade Organisation, warned that the threat of contagion from the eurozone was leading to greater protectionism.
A draft summit communique will see Europe pledge to take "all necessary policy measures" to create stability in the 17-nation single currency area, Reuters reported. It also said the document would include an assurance from eurozone leaders that they would move towards a "more integrated financial architecture". Eurozone leaders are expected to outline a roadmap towards closer political and economic union at a summit in Brussels on June 28.
A White House spokesman told journalists in Mexico that following a meeting with German Chancellor Angela Merkel, United States President Barack Obama was "encouraged by what he heard regarding ongoing discussions in Europe about the paths they are pursuing to address the crisis".
But ahead of the G20, Barroso – asked by a journalist about why North Americans should take risks to help Europe – said Europe did not have sole responsibility for the problems in the global economy. "Frankly, we are not here to receive lessons in terms of democracy or in terms of how to handle the economy," he said.
He noted that "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". And hitting back at criticisms that the eurozone had been too slow to deal with the problem, Barroso noted: "In Europe we are open democracies. Not all members of the G20 are open democracies. We are certainly not coming here to receive lessons."
European Council President Herman Van Rompuy added: "We are not the only one that are so-called responsible for the current economic problems all over the world."
At the summit the BRICS countries – Brazil, Russia, India, China and South Africa – said they would increase their contributions to the IMF by $95.5bn, including $43bn from the Chinese. It means that 37 of the Washington-based fund's members have raised a crisis-fighting pot worth a total of $456bn, though the US has not made additional contributions. In a statement, IMF managing director Christine Lagarde said: "These resources are being made available for crisis prevention and resolution and to meet the potential financing needs of all IMF members. They will be drawn only if they are need as a second line of defence."
In Greece, the focal point of the crisis, Antonis Samaras – whose centre-right New Democracy party won Sunday's elections – appeared close to forming a coalition government with the socialist Pasok and the small Democratic Left group after a series of discussions last night. Syriza, the radical left anti-bailout party led by Alexis Tsipras, which finished a close second in the poll, refused the chance to join the administration.
Samaras has said he wants to ease the conditions of Greece' European Union and IMF rescue package. But at the G20 summit, Merkel said the new Greek government had to "implement the commitments entered into by the country" and that the "programme framework has to be kept".
The rating agency Standard & Poor's, in a report published last night, said the short-term risk of Greece leaving the eurozone "may have lessened" but "there remains at least a one-in-three chance of its exit in the medium to long-term". It added that if a new coalition is formed, its "political resolve will be challenged by trade unions and other affected constituencies".
Elsewhere, Spain sold €3bn of 18-month and one-year bills today at average yields of 5.1 per cent and 5.07 per cent respectively – marking a continued rise in the government's cost of borrowing after it said it would seek up to €100bn in aid to recapitalise its ailing banking system.