BEIRUT

International

Eurozone under pressure as G20 finance chiefs meet

President Barack Obama speaks during a campaign event at Capitol Square, Sunday, Nov. 4, 2012, in Concord, N.H. (AP Photo/Pablo Martinez Monsivais)

MEXICO CITY: G20 finance chiefs gather Sunday for two days of talks as Europe faces new pressure to resolve a relentless debt crisis threatening global growth, with the specter of a Greek euro exit reappearing.

Finance ministers and central bank governors from the Group of 20 top economies arrived in Mexico City as debt-riddled Greece continues to trouble Europe's single currency while Spain fights off pressure to seek a bailout.

The United States is also in the spotlight over a looming "fiscal cliff" of spending cuts and tax hikes that could undercut the US economy and global growth.

The White House and Congress need to reach a compromise by the end of the year to avoid the cliff but a resolution will have to wait until after Tuesday's presidential election, with US President Barack Obama and Republican Mitt Romney locked in a tight race.

The Mexico City talks are not expected to yield major decisions.

Two key figures in world finance, US Treasury Secretary Timothy Geithner and European Central Bank Mario Draghi, are represented by deputies while China is focused on its Communist Party congress this week.

The meeting is a follow-up to a June summit, when G20 leaders vowed to coordinate "fiscal actions" to boost domestic demand if economic conditions deteriorated.

Since then, the IMF slashed its 2012 global growth forecast to 3.3 percent, eurozone unemployment rose to a record 11.6 percent in September and growth decelerated in emerging nations.

While the eurozone has moved closer to a banking union and activated a new crisis firewall, the problems in Greece have come back to haunt the single currency, more than two years after Athens received its first multi-billion-euro rescue.

Greek Prime Minister Antonis Samaras warned Sunday that Athens could be forced out of the euro if parliament fails to approve a new round of austerity measures needed for a lifeline from creditors this week.

"We must save the country from catastrophe... if we fail to stay in the euro nothing will make sense," he said.

Parliament is due to vote Wednesday on a bill outlining 18 billion euros ($23 billion) of cuts and other reforms, followed by a vote on Sunday on the 2013 budget.

Greece has been negotiating with the European Union, the International Monetary Fund and the European Central Bank to unlock a 31.5 billion euro tranche of a bailout package or risk bankruptcy in mid-November.

But the IMF said last week that the talks were stalled over the conditions for financing Greece, which has been seeking a two-year extension to meet its fiscal goals, sending stocks crashing.

"It is extremely important that as Greece undertakes these continued very challenging reforms... Europe comes together in support of these reforms, and helps Greece stay on the path of sustainability," a senior US Treasury official said Friday.

A French government source said eurozone officials will reassure G20 partners that "things are moving forward" ahead of a November 12 meeting of the bloc's finance ministers.

After Greece, Ireland and Portugal received bailouts, Spain has resisted pressure to do the same following a banking crisis, stressing that it has undertaken drastic austerity measures to clean up its finances.

A senior Canadian finance ministry official said there was a need for greater clarity around Spain and the path forward for it and other struggling eurozone nations.

A Spanish source said Economy Minister Luis de Guindos, who is attending the G20 talks as a guest, will outline the country's banking and labor reforms but will not dwell on why the country is not seeking a sovereign bailout.

 

Recommended

Advertisement

Comments

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

comments powered by Disqus

Advertisement

FOLLOW THIS ARTICLE

Interested in knowing more about this story?

Click here