Frayed Tempers at G-20: Euro-Zone Leaders Tired of Criticism from Abroad

By  in Los Cabos, Mexico

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.

Chancellor Merkel is feeling the weight of the world economy on her shoulders. Zoom
AFP

Chancellor Merkel is feeling the weight of the world economy on her shoulders.

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.

'Constructive Pressure'

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.

Article...
  • For reasons of data protection and privacy, your IP address will only be stored if you are a registered user of Facebook and you are currently logged in to the service. For more detailed information, please click on the "i" symbol.
  • Post to other social networks

Comments
Discuss this issue with other readers!
4 total posts
Show all comments
    Page 1    
1. A Canadian Perspective
Mingy 06/19/2012
Our PM has been rather vocal in suggesting we (Canada) not help the EU with bail out money. I obviously can't speak for his reasoning, but I suspect that he and his advisers believe the situation is beyond repair. In other words, up till now, the EU leadership seemed to believe that one more bail out and the problem will be solved. I think, and I believe the government thinks, at this point it is throwing good money after bad. Of course, the global economy is a game of confidence, so nobody can just come out and say 'everybody panic' because they well. And that is another thing: I think Harper realizes that, with the EU and now China in trouble the Canadian economy, which is largely driven by commodities, could be in for a major crisis and they are preparing for that. I just want to make it clear that I don't think its because the people of Canada just don't care about Europe. Many of us are first or second generation immigrants and, indeed, have considerable concern for the people there. I would like to add that I love der Spiegel, and frequently visit Germany. I would very much like to learn German, but I'm not very good at languages. Somebody might want to look in to the 'register' page, which is entirely in German (I could not find an English version). It took a lot of visits to 'Google Translate' to get a user name!
2. Criticism
rbe1 06/19/2012
The western reporters should have much to be embarrassed about, considering the crisis affecting the globe was created and driven by greedy investors operating in unregulated US markets.
3. € - get out now
Eleos 06/20/2012
Mr Barroso is an example of what is wrong with the EU, an unelected official who serves no essential purpose and whose salary and expenses are added to the debts, a compromise candidate bereft of leadership serving only as an indicator of the inclusiveness extended to the smaller countries of the block. Germany should leave the Eurozone as soon as possible, with the other northern nations who have had enough of the hypocritical arm-twisting. Germany was coerced into the Eurozone - hitch your economic prowess to the rest of a sclerotic and corrupt Eurozone or we will not allow you to unify your nation. The argument that she is dependent on an undervalued currency for exports does not bear scrutiny. When the Deutschmark was created there were 12 to one pound sterling and when it expired there were 3 to the pound. An fourfold increase in the value of its currency did not stop German exports increasing even more than fourfold relative to those of Great Britain. Quality will always attract buyers whatever the price. The chorus of so-called economic experts, the same ones who did not foresee the crisis, eagerly supported by media channels like Bloomberg and the BBC, are determined to put Germany in the place they have reserved for her since the end of WWII, a nation without military power and whose economic power must be regularly curtailed so that it does not give her a decisive say in world affairs.
4. Spiege$ and German Comp$acency
zummerzetboy 06/20/2012
Hi, Sorry my $aptop key for $ doesnt't work - so. I've substituted $. A$$ the wor$d knows the fundamenta$ prob$em with the Eurozone is the ba$ance of payments mismatch between "North Europe" and "South Europe" - p$us the democratic deficit of the EU Institutions represented in pub$ic by Barroso, Rompuy, Rehn et a$. Spiege$'s b$and reporting of the G20 Summit perpetuates this misrepresentation - but presuming inte$$igence in Spiege$'s editors and reporters this amounts to Spiege$ being an agent of Merke$'s propaganda rather than an independent reporter. I'd hate this to be the case and so cha$$enge Spiege$ to pub$ish in fu$$ the ways in which Ange$a Merke$$'s Government has f$outed the ru$ings of the German Constitutiona$ Court.
Show all comments
    Page 1    
Keep track of the news

Stay informed with our free news services:

All news from SPIEGEL International
Twitter | RSS
All news from Europe section
RSS

© SPIEGEL ONLINE 2012
All Rights Reserved
Reproduction only allowed with the permission of SPIEGELnet GmbH




Graphic: The limitations of the ESM. Zoom
DER SPIEGEL

Graphic: The limitations of the ESM.


European Partners
Presseurop

Politiken

Corriere della Sera

Concordia Leaves Giglio

Concordia Casts Off


Facebook
Twitter