Los Cabos: The leaders of the world’s major economies embarked on the final day of the G20 summit Tuesday determined to kickstart growth and pull the euro zone back from the brink of disaster.
European members were under extraordinary pressure from their international counterparts to loosen the straitjacket of their austerity programs and to allow the European Central Bank (ECB) to open the lending floodgates.
And, beyond the summit conference center in the Mexican resort of Los Cabos, bond markets jacked up rates on Spanish and Italian debt amid self-fulfilling fears that the debt crisis that sank Greece was spreading once again.
Germany’s Chancellor Angela Merkel, the driving force behind the euro zone’s austere determination to privilege deficit busting over stimulus spending, has publicly stood her ground, although US officials say her position is softening.
A draft version of the G20 final statement, which was to be finalized and published by the leaders on Tuesday, suggested that a form of words would be found that would commit the leaders to a pro-growth agenda.
“All G20 members will take the necessary actions to strengthen global growth and restore confidence,” it said, vowing that euro zone members would safeguard the stability of the single currency in the face of volatile markets.
The version seen by AFP allowed no hint that Merkel or her allies might crumble and allow the ECB to pump out cash or to pool German debt with that of the weaker euro zone members in order to create low-interest euro bonds.
But it contained a phrase that opened up the possibility of more lending and spending if the European economy continues to struggle.
“Should economic conditions deteriorate significantly further, those countries with sufficient fiscal space stand ready to coordinate and implement discretionary fiscal actions to support domestic demand,” the draft reads.
Officials from euro zone countries also patted themselves on the back for remaining more or less united in the face of pressure from the United States, emerging powers, Britain and a sceptical media.
EU Commission chairman Jose Manuel Barroso bristled at hostile questioning over why his rich continent needed so much support from abroad, declaring: “We are certainly not coming here to receive lessons from nobody.”
US President Barack Obama cancelled a planned meeting with European G20 members after an official dinner hosted by Mexico’s President Felipe Calderon ran long, but White House aides said compromise was possible.
“We’re seeing a shift in the European discussion regarding the critical importance of supporting demand and job growth,” US treasury official Lael Brainard said.
Obama called for Greece to be given more time to get its affairs in order, after parties committed to honouring the terms of its debt write-down agreement won a majority of seats in Sunday’s parliamentary election.
But Merkel -- fast becoming a hate figure among Greeks -- remained unmoved. “Elections cannot call into question the commitments Greece made. We cannot compromise on the reform steps we agreed on,” she told reporters.
Leaders of the G20 nations. Photo: Reuters
Progress was made in Los Cabos in boosting the resources available to the International Monetary Fund (IMF) to provide a firewall to protect debt-ridden states from the threat of default if lending costs rise.
IMF chief Christine Lagarde thanked emerging powers, led by China, for pledging enough to bring her pool for emergency loans up to $456 billion (€361 billion) in exchange for a greater say in Fund affairs.
In addition to summit sessions, the leaders were to hold a series of side meetings, notably a bilateral between Obama and Chinese President Hu Jintao and a possible reschedule of the cancelled US-EU talks.
The summit was due to draw to a close with a ceremony at 2330 GMT, after which Calderon was to address the press.