Cannes, 02/11/2011 (Agence Europe) - Not in his wildest dreams could French President Nicolas Sarkozy, who is hosting the G20 summit in Cannes on Thursday 3 and Friday 4 November 2011, have imagined a worse outcome. He had been hoping that the world's great superpowers would back the eurozone's efforts to deal with the debt crisis after the eurozone drew up an action plan last week (see EUROPE 10483), but the news on Monday night that Greece will be holding a referendum on the bailout package has thrown everything upside down and forced last-minute changes to the agenda for the summit (see EUROPE 10486). It has also revived fears of the debt crisis spreading to larger economies like Italy, where debt rollover costs have been reaching record highs (see separate article).
On a post-it note attached to the official programme, the French Presidency of the G20 convened a special meeting on Wednesday afternoon of the French president, German Chancellor Angela Merkel, the presidents of the European Council and European Commission, José Manuel Durão Barroso and Herman Van Rompuy respectively, the chair of Eurogroup Jean-Claude Juncker, and the director-general of the International Monetary Fund, Christine Lagarde. It was clear that their talks would be focusing on the immediate consequences of the news of the Greek referendum over the second bailout package. The meeting was not attended by the new head of the European Central Bank, Mario Draghi, who was chairing his first meeting of the ECB Governing Council that day.
The French line seems to be that the Greeks will not be given the €8 billion in bilateral and IMF loans decided after creditor fact-finders (of the European Commission, the IMF and the ECB) published their recent report on the country's economy. The French want the Greeks to hold the referendum as soon as possible and before the end of the year to reduce friction on the money markets. They want the referendum to be over whether Greece should stay in the eurozone rather than the bailout package as such.
These views were put to Greek Prime Minister George Papandreou and Greek Finance Minister Evangelos Venizelos in a separate meeting of European leaders on Wednesday night. Meanwhile, Sarkozy met and dined with Chinese President Hu Jintao to explain in detail the eurozone's plans for solving the sovereign debt crisis like the second Greek bailout (public aid of €130bn and voluntary private aid of €100bn in the form of a 50% write-down of the face value of Greek bonds), boosting the EFSF bailout fund using new IMF investment vehicles and faster and higher recapitalisation of European banks.
Before flying off to Cannes on Wednesday 2 November, Angela Merkel said that it was action that counted and agreement had been reached with Greece last week about an aid programme. “We agreed a programme with Greece last week. And from the EU side, at least for Germany, we want to implement this programme”, Merkel said ahead of talks with Papandreou. “For this, we need clarity and that's what these talks tonight are about.” Upon arrival in Cannes, the president of the European Commission, Jose Manuel Barroso, said: “I want to make a very urgent and heartfelt appeal for national and political unity in Greece. But for those measures to be implemented it is critically important to have stability in the country. Without the agreement of Greece to the EU-IMF programme, the conditions for Greek citizens would become much more painful, in particular for the most vulnerable. The consequences would be impossible to foresee.” He said that the Commission had always called for consensus among the whole of Greek society about the austerity measures. Lagarde said that according to IMF forecasts, Greece would not be able to stand on its own two feet until 2020 and the country had not yet made all the basic reforms needed to return to economic growth.
Going by the opinion polls quoted in the Greek media, the majority of the population reject the austerity measures that are the strings attached to the financial aid packages, but want to remain in the euro. The Greek government faces a crucial confidence vote in parliament on Friday. After announcing the referendum, Papandreou was left with a majority of only two.
On the fringes of the G20 summit, employers' organisation B20 commented: “We continue to believe the agreements regarding bank recapitalisation, extending the EFSF and improving the sustainability of Greek borrowing alongside commitments from all member states to implement recommendations regarding budgetary policy and structural reform represent essential steps forward in helping to strengthen the EU economy. We urge you, at your tonight's meetings, to make sure that the stabilisation plan is fully applied by all member states.”
Briefing the Irish parliament on Wednesday about the outcome of the eurozone summit, Irish Prime Minister Enda Kenny stressed the importance of certainty and stability for Ireland, which is itself in receipt of international aid. (MB/transl.fl)