GLOBAL LEADERS rebuffed Europe’s effort to drum up investment in the euro-zone bailout fund, raising questions over a core element of the new plan to tackle the debt crisis.
With the G20 summit overshadowed by the turmoil in Greece and anxiety over Italy’s austerity plan, euro-zone leaders made little headway as they sought to encourage external participation in the European Financial Stability Facility (EFSF) fund.
With Greece under pressure to bring a week of tumult to an end, European leaders were urged to take further steps to calm the debt crisis.
The authorities in Europe had hoped cash-rich developing countries such as China and Brazil would contribute to the expansion of the EFSF’s lending capacity to some €1 trillion from €440 billion.
Although they received abundant moral support in Cannes, any pledge of actual financial aid proved elusive as global leaders said it was up to Europe to settle its own problems.
“There are hardly any countries here which said they were ready to go along with the EFSF,” German chancellor Angela Merkel told reporters.
This message was reinforced by Brazilian president Dilma Rousseff, who said her country and China were unlikely to provide assistance to the EFSF.
“I have no intention at all to make direct contributions,” Ms Rousseff said. “China told us it would rather contribute via the IMF.”
While European Council president Herman Van Rompuy said he remained optimistic on this front, analysts poured scorn on Europe’s failure to make progress. “The only thing worse than asking China and the G20 to help solve self-inflicted euro-area problems is asking and getting turned down,” said Sony Kapoor of Brussels think tank Re-Define.
In a communique issued before they left Cannes, G20 leaders blamed the debt crisis for spurring a weakening of the global recovery. “In this context, tensions in the financial markets have increased mostly due to sovereign risks in Europe,” they said.
US president Barack Obama, who has repeatedly pressed European leaders to intensify the campaign against the crisis, said the events in Greece stressed the importance of implementing the new rescue plan quickly.
“Although the actions of [Greek prime minister George] Papandreou and the referendum issue over the last couple of days got a lot of people nervous, the truth is that the general approach, which involves a voluntary reduction on the part of those who hold Greek debt, Greece continuing with reforms and structural change, that’s the right recipe,” Mr Obama said at a press conference.
“It just has to be carried out, and I was encouraged that, despite all the turmoil in Greece, even the opposition leader in Greece indicated that it’s important to move forward.”
Mr Obama said all leaders had an enormous interest in Europe’s success and all would be affected if Europe was not growing. “The Europeans agree with us that it is important to send a signal that the European project is alive and well, and that they are committed to the euro, and that they’re committed to resolving this crisis.”
Other leaders, however, stressed Europe’s own responsibility to deal with the debt debacle.
“Europe needs to get its own house in order,” said Australian prime minister Julia Gillard.
Canadian prime minister Stephen Harper adopted a similar stance. “The sooner European leaders and others can simply confirm they’re moving forward, I think that would be the quickest way to get us out of this crisis of confidence,” he said. “Markets are constantly searching for good news and opportunities.”
European Commission president José Manuel Barroso said national unity in Greece was crucial. “Consensus among all political forces is needed to implement the demanding but indispensable measures,” he told reporters.
“We want Greece to remain in the euro. At the same time, Greece must decide whether it is ready to take the commitments that come with euro membership.”
Mr Van Rompuy said the stakes for Greece were fundamental. Although the fate of Mr Papandreou remained unclear throughout the day, he expressed the view that events in Athens were moving in the right direction.
“The stakes are existential for Greece,” he said.
“Greece must clarify as soon as possible its intentions.”