Frayed Tempers at G-20 Euro-Zone Leaders Tired of Criticism from Abroad
The state of the euro zone is the dominant theme at the G-20 summit in Mexico this week. But European Commission President Barroso has had enough. He erupted in frustration on Monday and insisted that Europe is doing all it can. Not all of the gathered leaders would agree.
Angela Merkel is seen internationally as a key figure for overcoming the euro crisis. As such, it seems appropriate that the chancellor was the first government leader to speak at the G-20 Summit in Mexico on Monday afternoon following host Felipe Calderon's speech. The gathering is taking place in San Jose de los Cabos.
What she had to say likely came as no surprise to the gathered statesmen. She counted off what the Europeans have done in the past year to make the common European currency crisis proof: the fiscal pact, the euro rescue fund, bank capitalization, the growth pact and the upcoming additional steps toward a political union.
With this list Merkel countered the argument that the Europeans, with their half-hearted crisis management, are endangering the world economy. We are indeed doing something, was her message from the resort town.
It still, however, seems to be insufficient. The euro crisis has regularly dominated headlines for two years and there's no end in sight. Just in time for the G-20 Summit, the cover of "Newsweek" magazine showed a broken one-euro coin surrounded by the words "Kaput? Fini? Finito? The End?" The shaky victory of the conservative New Democracy party in Sunday's Greek election, despite providing a measure of stability to the political landscape in Athens, serves as yet another reminder of just how fragile the currency union is.
For the Europeans, lodged in an all-inclusive hotel complex in the Mexican desert featuring palm trees, pools and golf courses, there was no escaping the renewed pressure. The euro crisis is no longer a European affair, OECD General Secretary Angel Gurria said. It's about the world economy. British Prime Minister David Cameron said one has to exert "constructive pressure" on the euro zone.
Other evidence from the Mexican meeting that the euro crisis is now an international one came from International Monetary Fund chief Christine Lagarde, who said the most important developing countries are chipping in billions to shore up the International Monetary Fund's efforts to fight the global financial crisis.
China said it will contribute $43 billion and India and Russia will each give $10 billion. The three countries are members of the so-called BRICS nations, which also include Brazil and South Africa. The contributions will not be made in cash but in credit offered by the countries' central banks to the IMF for use when and if a $400 billion emergency fund is used up.
While euro-zone members are well aware that the crisis affects the entire world, they are becoming increasingly allergic to advice from abroad. On Monday morning EU Commission President José Manuel Barroso lost it when a Canadian reporter in shorts wanted to know why the North Americans should be responsible for the problems of rich Europeans. "We are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy," Barroso fumed. "By the way, this crisis was not originated in Europe. 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 mood was supposed to be better this time around. No one wanted a repeat of the G-20 summit in Cannes last November when the Europeans found themselves bickering with the rest of the world about what needed to be done about the euro crisis. This time it was supposed to be harmonious. But the differences of opinion remained just beneath the surface.
Haggling in the Coming Months
Even before the summit, Barack Obama and Merkel met for a bilateral talk to smooth over their differences. The US president is among Merkel's loudest critics due to the degree to which the euro crisis affects the US economy -- and with it, his chances of being re-elected. This time Obama was more reserved. The president was "encouraged" by the talk, a spokesman said. The Germans have shown a change of heart and are more open to the kind of economic growth measures championed by the Obama administration.
This interpretation of the meeting was promptly rejected by the German side. But a certain amount of movement is detectable nonetheless. At the EU summit at the end of this month, not only will European leaders come to an agreement on a growth pact, but there will also be movement toward the establishment of a European banking union. The G-20 draft statement hints as much: The participants welcome the euro-zone plan and a centralization of bank supervision, re-capitalization of banks and deposit insurance.
There will be much haggling in coming months over just how the bank union should look. But the G-20 document approval would mark the first time the plan has made it into writing. The final declaration is also supposed to contain an "Action Plan for Growth." This includes only vague commitments to improving domestic demand and to confirming previous EU decisions. The EU states will be called upon to "take all necessary actions" toward finding a solution to the crisis.
The worry over Greece is less acute following the victory of the conservatives on Sunday. All participants expressed the hope that the election winner Antonis Samaras will be able to form a stable government and continue the austerity plan.
Yet the gathered leaders are well aware that the crisis will flare up again following the next progress report of the Troika, made up of the European Commission, the European Central Bank and the IMF. The Greek government halted reforms during the election campaign. A delay in reaching the austerity targets set out be the EU seems inevitable.