Spain forced closer to precipice as divisions open among G20 leaders

Merkel unwilling to offer Greece concessions as election victor tries to win rivals' support in Athens

Leaders of the world's largest economies, the G20 nations, were drowning not waving at their seaside summit in Los Cabos, Mexico last night, as they struggled to find any kind of coherent consensus on what to do about the eurozone crisis.

The debate in Los Cabos came against a chaotic backdrop in two of the eurozone's most troubled corners.

In Madrid, despite hopes that the Greek election results might bring some stability to the financial markets, the brief positive response rapidly gave way to more fearful selling yesterday as borrowing costs shot upwards. Spanish 10-year bond yields hit their highest levels since the foundation of the single currency at one point in trading, touching 7.28 per cent.

In Athens, the winner of Sunday's election, the New Democracy Party, was embarking on what is expected to be a tremulous effort to form a government that can begin negotiating with the European central authorities on the terms of new support that in turn will allow it remain in the eurozone.

But at the G20 summit, President Barack Obama was trying to knock heads about the seriousness of the problem that is now threatening his re-election. Angela Merkel, the German Chancellor, did little to help, saying upon her arrival that she still expects the new Greek government to stick to early austerity commitments previously made by Athens. And David Cameron blamed "muddle-headed thinking" on the part of some European governments for the fever now gripping the monetary union. He warned that the eurozone faced years of "perpetual stagnation" or even a complete break-up if tough decisions were not taken.

This morning the G20 will issue a communiqué suggesting that Europe's leaders are now ready to "take all necessary policy measures to safeguard the integrity and stability of the euro area". But there was scant sign of anyone agreeing on what those should be. The G20 will also call for breaking the "feedback loop between sovereigns and bank", implying that a first step must be the creation of a banking union.

Mr Cameron last night spoke of what he said was the inevitable logic of setting up a banking union, which would mean a central deposit guarantee funds and central regulatory authority given to the European Central Bank. "If banks in one part of the single currency are in trouble then it's right that other parts of the union should protect depositors to protect the currency as a whole."

There was nothing to suggest the biggest player of all in the future of Europe – the government of Ms Merkel – was anywhere near conceding that a banking union is viable. She came to Mexico instead with a variety of alternative proposals for greater financial integration and even a transfer of new powers to the European Union.

None of this fractiousness will encourage the leader of the New Democracy Party, Antonis Samaras, who said he wants to form "a national salvation government" with as many parties as possible. His narrow victory came after a hard-fought election that left Greeks more polarised than ever.

As his first step towards creating a coalition, Mr Samaras met yesterday with Evangelos Venizelos, the leader of the socialist party Pasok, the ruling party of Greece until late last year which has since seen many of its supporters defect to Syriza. Pasok, whether it joins a new government or simply supports it in parliament, will need to show that it is an effective opponent of the EU austerity measures if it wants to avoid further defections to the left.

Some may not welcome the frank interventions of Mr Cameron, but he made no apology for it, warning that Britain has as much to lose from European stagnation as anyone else even if it is not part of the monetary union. "There was too much optimism at the outset about the economic fundamentals in the periphery of the eurozone," he said. "If the eurozone is to stay together then it has to make at least some of these difficult decisions.

"The alternatives to action that creates a more coherent eurozone are either a perpetual stagnation from a eurozone crisis that is never resolved... or a break-up."

Greek election: World reaction

Angela Merkel "The important thing is that the new government sticks with the commitments that have been made. There can be no loosening on the reform steps."

Mario Monti "This allows us to have a more serene vision for the future of the European Union and for the eurozone."

David Cameron "The outcome of the Greek election looks clear in terms of a commitment to stay in the eurozone and to accept the terms of the memorandum. But I think those parties that want that to happen can't afford to delay and position themselves. If you are a Greek political party and want to stay in the eurozone and accept the consequences that follow, you have got to get on with it and help form a government."

Start your day with The Independent, sign up for daily news emails
News
peoplePair enliven the Emirates bore-draw
Arts and Entertainment
tvPoldark episode 8, review
News
Britain's opposition Labour Party leader Ed Miliband (R) and Boris Johnson, mayor of London, talk on the Andrew Marr show in London April 26
General electionAndrew Marr forced to intervene as Boris and Miliband clash on TV
News
news
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Senior Accounts Assistant - Accounts Payable - St. Albans

£26000 - £28000 per annum + benefits : Ashdown Group: Senior Accounts Assistan...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Recruitment Genius: Installation and Service / Security Engineer

£22000 - £40000 per annum: Recruitment Genius: This company is part of a Group...

Recruitment Genius: Service Charge Accounts Assistant

£16000 - £18000 per annum: Recruitment Genius: Are you a a young, dynamic pers...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions