Eurozone wins G20 backing for deeper integration
by Daniel Mason
World leaders at the G20 summit in Mexico pledged their full support for deeper integration in the eurozone and said they would "work collectively" to revive the fragile world economy.
A final summit communique pledged that eurozone countries would "take all necessary policy measures to safeguard the integrity and stability of the area". G20 leaders said: "Clearly, the global economy remains vulnerable, with a negative impact on the everyday lives of people all over the world, affecting jobs, trade, development, and the environment." They added that they would "work collectively to strengthen demand and restore confidence", and produced a "growth and jobs action plan to achieve those goals".
As well as backing plans to move towards a more deeply integrated eurozone banking system, world leaders welcomed Spain's plans to recapitalise its banks with the support of up to €100bn from the European Union bail-out funds. Spain's borrowing costs have soared to record levels in recent weeks and world leaders said that the adoption of the fiscal compact to limit debts and deficits, together with growth-enhancing measures and structural reforms, were "important steps" towards reducing these costs to sustainable levels.
A proposal put forward by Italian Prime Minister Mario Monti to ease the borrowing costs in countries where they had reached unsustainable levels, possibly by allowing bail-out funds to buy bonds, is "an idea worth looking at", French President Francois Hollande told reporters. Monti said the plan was to "stabilise borrowing costs, especially for countries who are complying with their reform goals, and this should clearly be separated from the idea of a bail-out". It is likely to be discussed by European leaders ahead of their summit in Brussels on June 28-29, when European Council President Herman Van Rompuy is due to present an outline of how the eurozone will move ahead with its longer-term plans for closer economic union.
World leaders also called on the euro area to "work in partnership with the next Greek government to ensure they remain on the path to reform and sustainability". Talks on forming a coalition in Greece have continued today, led by conservative New Democracy leader Antonis Samaras, whose party came first in Sunday's elections. New Democracy, along with the socialist Pasok and Democratic Left parties, want to stick to Greece's EU and International Monetary Fund bail-out plan while negotiating on the terms and conditions of the deal.
In a joint statement following the G20 summit, Van Rompuy and European Commission President JosÚ Manuel Barroso said world leaders had "expressed support" for deeper economic and fiscal integration in the eurozone. "Our partners have recognised that a strong, deeply integrated EU is decisive for systemic global stability," they said. "This recognition mirrors the momentum which is now building in Europe. The EU is determined to show the irreversibility of the euro and of the European project."
The pair added that G20 leaders had shown "strong resolve to promote growth and jobs" as well as committing to "build a more responsible and solid international financial sector".
United States President Barack Obama said there was no "silver bullet" to solve the crisis but he was "confident that over the next several weeks, Europe will paint a picture of where we need to go". He added: "What I have heard from European leaders during these discussions, they understand the stakes, they understand why it's important for them to take bold and decisive action, and I am confident they can meet those tests."
British Prime Minister David Cameron also said progress had been made. "They committed to take step towards fiscal and economic integration including through a banking union. These are significant agreements. Now the eurozone needs to get on and implement them. What I have sensed at this summit is that there is a fresh impetus with the eurozone members in terms of using all the mechanisms, institutions and firepower that they have to stand up and support their currency."
Van Rompuy, Barroso and Obama also issued a joint statement following separate talks on a potential trade agreement between the EU and US. They said there was "more to be done to deepen and broaden" the transatlantic relationship. "A bold initiative to expand trade and investment could make a significant contribution to our strategy to strengthen growth and create jobs," they said.