G20 draws blank in eurozone crisis

 

World leaders today drew a blank in their efforts to resolve the eurozone crisis, as the G20 summit ended with no agreement on crucial measures to shore up ailing economies.

In developments which did nothing to boost market confidence, the Group of 20 leading economies failed to thrash out a detailed plan to stabilise the single currency or to boost the International Monetary Fund's ability to respond to emergencies.

Prime Minister David Cameron acknowledged that the ongoing uncertainty in the eurozone was having a "chilling" effect on the British economy.

And he warned squabbling eurozone leaders that "the world can't wait" for them to finalise plans to bail out Greece, recapitalise banks and erect a one trillion euro (£870 billion) "firewall" to protect the single currency.

Speaking at the conclusion of the two-day summit in the French Riviera resort of Cannes, Mr Cameron made clear Britain is preparing for Greece's possible departure from the euro, saying it was time for Athens to take decisive action "one way or the other".

He insisted once again that Britain will not contribute directly or indirectly to any bailout of the euro.

But he said the UK stood ready to help beef up the IMF's lending capacity with additional money, within limits already approved by Parliament.

"It is in Britain's interests that the eurozone crisis is sorted out as rapidly as possible," said the Prime Minister.

"This is having a chilling effect on our economy and every day it goes on not being resolved is a day that is not good for our economic prospects. That is a fact.

"One aspect of getting it resolved is to resolve the Greek situation one way or the other. The Greeks have to decide - do they want to stay in the eurozone, accept the debt reduction package that was negotiated and make that work for them or do they want to take a different path?

"What they can't do is just string this out endlessly with another round of discussions and negotiations. The world can't wait for the eurozone to go through endless questions and changes on this."

Six weeks ago, Chancellor George Osborne said the summit was the deadline for action to rescue the euro.

But talks characterised by some observers as "brutal" ended with little progress on the outline deal agreed by the 17 eurozone nations on October 27.

Strong-arm tactics from French President Nicolas Sarkozy, the summit's host, pressured Greek PM George Papandreou to ditch plans for a referendum on the deal. But Mr Papandreou still faces a vote of confidence which may topple his government.

Meanwhile, Italian PM Silvio Berlusconi was humiliatingly forced to accept IMF monitoring of his tottering economy - though he refused an offer of direct support from the global financial organisation.

A clearly dejected German Chancellor Angela Merkel confirmed that "hardly any" countries had agreed to get involved with the mooted trillion-euro firewall fund.

Hopes that China would offer financial backing to the European Financial Stability Fund through a special purpose vehicle appear to have come to nothing.

And the US and other non-European countries blocked any agreement on boosting the IMF's capacity until after the eurozone has got its house in order.

Mr Osborne has said he was "optimistic" that agreement on IMF funding would be reached, with the aim of bolstering confidence in the robustness of the world economic system.

But a communique issued at the end of the summit said only that the G20 nations "stand ready to ensure additional resources could be mobilised in a timely manner" for the IMF.

Describing Cannes as "an important staging post", Mr Cameron insisted that some progress had been made on reviving the world economy, with agreement to resist protectionism.

But he said non-eurozone states, including Britain, had sent a clear message to the single currency members: "Global action can't be a substitute for concrete action from the countries of the eurozone standing behind their currency, implementing what they have agreed and resolving the uncertainty that remains in Greece and elsewhere."

He made no secret of the fact that the UK Government is preparing for the possibility that Greece could become the first country to exit the single currency as a result of its debt problems.

"If Greece does leave the eurozone, we have to be frank about what this would mean economically," said the PM.

"There would be bad economic effects that would be felt across Europe, including in the UK, for obvious reasons.

"Because of that, it is right that we should have proper contingency plans in place to deal with any and all eventualities."

PA

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