World leaders will seek to cure economy at G20 summit in Los Cabos

The leaders of the world’s major powers will seek to buy the global economy some breathing space at the G20 summit Monday with new support for an IMF financial firewall and for Greece.

LOS CABOS- European leaders were relieved to be able to attend the summit after clearing the hurdle of Sunday’s pivotal Greek election, which gave parties that support Athens’ EU and IMF-led bailout terms a parliamentary majority.

The euro and Asian stock markets surged higher in early trade Monday, amid cheers on trading floors at the Greek result, which saw defeat for a hard-left party that had threatened to reject the cuts enshrined in the deal.

Spanish Prime Minister Mariano Rajoy held a teleconference with his British, French, German and Italian counterparts from his plane, saying on arrival: “I think what we are going to transmit is a message of confidence in the euro.”

If Greece had voted to reject the strict spending rules imposed in return for a write-down in its crippling debt, the eurozone would have been plunged deeper into a crisis that has threatened the whole global economy.

US President Barack Obama, who was also due at the opening of G20 talks in the Mexican resort of Los Cabos, must also have breathed a sigh of relief — more economic turmoil could endanger his own chances of re-election.

Meanwhile, the BRICS bloc of Brazil, Russia, India, China and South Africa were expected to pledge tens of billions of dollars in new loans to the IMF bailout fund at a meeting before the opening of the G20 summit.

China’s Vice Finance Minister Zhu Guangyao predicted the group would pledge at least 60 billion dollars and thus boost the firewall up to the International Monetary Fund’s target of 430 billion dollars (380 billion euros).

“China is confident that the IMF will realize its 430 billion and China will pitch in,” Zhu told reporters as national delegations began to arrive at the luxury hotels lining the Los Cabos coastline.

Zhu said the BRICS and other emerging powers had pledged at the previous G20 summit to come up with the funds, adding: “And so during this Los Cabos summit a specific amount will be announced.”

The IMF fund will serve to backstop governments that are struggling to cope with debt repayments, but eurozone leaders will still face pressure from their G20 peers to make reforms to head off future financial crises.

World Bank president Robert Zoellick said that confusion over Europe’s debt battle plan had rattled bond markets and had undermined last week’s “wasted” bailout of Spanish banks.

“To take your Spanish example — it’s actually 100 billion euros, and to have that as being a negative story? It’s amazing. Why was it? It is because the delivery was extremely poor,” Zoellick said.

Eurozone powers agreed last week to provide a bailout loan of up to 100 billion euros to salvage Spain’s stricken banks, but the deal failed to quell the intensifying storm on the debt market.

The head of the Organization for Economic Cooperation and Development said Europe had the resources to deal with the crisis but must “take down the scaffolding” around EU institutions such as the European Central Bank.

“The ECB can help stabilize the bond market and the ECB really is the bazooka,” Angel Gurria said, noting that the bank had already effectively provided a trillion euros over a month to cope with the crisis.

“The problem is if you go into your championship bout with one hand tied behind your back, you have a pretty fair shot at losing,” he warned.

“Europeans have to display the awesome firepower that is at their disposal, and they have to transmit the message that they’re willing to use the awesome firepower,” he said.

The G20 summit, hosted by Mexico’s President Felipe Calderon, was to begin on Monday and last two days — with several of the powers present also holding important bilateral meetings on the sidelines.

Among these was Obama’s keenly anticipated meeting with his Russian counterpart Vladimir Putin, the pair’s first meeting as presidents.

Obama sees his “reset” of relations with Russia as a key achievement, despite Putin’s often strident anti-Western rhetoric, but the two leaders remain far apart on many issues, in particular the conflict in Syria.

18.06.2012
SOURCE: CUMHURIYET ENGLISH