NEWS,19.06.2012

Growth the watchword at G20 summit

 

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 eurozone 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 to open the lending floodgates.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 Angela Merkel remains the driving force behind the eurozone's austere determination to privilege deficit busting over stimulus spending, although US officials say her position is softening."Discussion here has been balanced: we need the right mix of consolidation and growth stimulus at the same time," Merkel told reporters on Tuesday, saying the previous night's showpiece dinner had been a "very frank and honest exchange."A draft version of the G20 final statement, which was to be finalized and published by the leaders on Tuesday, suggested that a formulation 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 eurozone 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 eurozone members in order to create low-interest eurobonds.But it 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.There was also an indication that Merkel was coming round to the idea of a more integrated EU banking system that would allow joint supervision and a unified system to pay back depositors in any failing institutions."We support the intention to consider concrete steps towards a more integrated financial architecture, encompassing banking supervision, resolution and recapitalization, and deposit insurance," the draft statement said."Markets expect that we work together more closely," Merkel told reporters on Tuesday morning, without specifically mentioning unifying the banking system.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 the official dinner hosted by Mexico's President Felipe Calderon ran long."Everything that could have been said at the Obama meeting had been said at dinner, so we were done with the topic," Merkel said.Obama called for Greece to be given more time to get its affairs in order, after parties committed to honoring the terms of its bailout 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 on Monday.Progress was made in Los Cabos in boosting the resources available to the International Monetary Fund to help protect vulnerable countries from the backwash of the eurozone crisis.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 euros) in exchange for a greater say in Fund affairs.In addition to summit sessions, the leaders were to hold a series of side meetings on Tuesday, notably a two-way 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.Next year's G20 summit will be held September 5-6 in Saint Petersburg, Russia.

 

Greek leaders poised for coalition deal

 

Greece's conservatives expect to be able to form a coalition Government with the Socialists today, allowing the two parties that dominated politics for decades to share power despite a major anti-establishment election vote.Conservative New Democracy leader Antonis Samaras has promised to negotiate less punishing terms for Greece's international bailout, after only narrowly beating a radical left-wing party that campaigned to scrap the austerity deal entirely.A senior New Democracy official expected agreement soon on a new cabinet with the PASOK Socialists and possibly another smaller centre-left party following Sunday's election, the second in as many months.Speaking late last night, he said a deal would be reached today that would involve more than a symbolic involvement by PASOK in the Government."They will participate actively," said the official, who declined to be identified.New Democracy and PASOK alternated in power from the fall of military rule in 1974 until last year, when Greece's economic crisis forced the arch rivals to share power in a pro-bailout national unity Government."Political leaders should be aware of the fact that this Government is Greece's last chance to remain in the eurozone," the centre-left daily Ta Nea said in an editorial."The Greek people are ready to reward the parties that manage to ease austerity and punish those that raise voices of dissent," it said.The comment underscored the widespread expectation in Greece that a new Government will be able to negotiate an easing in the tough conditions of the European Union and International Monetary Fund bailout despite resistance from Germany.Many Greeks hold both parties responsible for the nation's near bankruptcy, which forced it to take bailouts from the EU and IMF in 2010 and again this year.New Democracy narrowly won the election, averting the immediate risk of a Greek euro zone exit but raising doubts on whether the new Government can impose austerity cuts on a nation deeply divided over the price for bailout funds.After claiming victory over the radical leftist SYRIZA party to jubilant crowds, Samaras began yesterday the more sobering task of talking to rivals to cobble together a coalition.The greatly weakened PASOK, which finished third in Sunday's vote, has yet to commit to supporting Samaras, but its leader Evangelos Venizelos said talks must be wrapped up by today - signalling a deal would be agreed by then.The smaller, moderate Democratic Left party, which opposed the bailout backed by the conservatives and the Socialists, has also suggested it will offer conditional support to a Government led by Samaras.Venizelos was due to meet the head of Democratic Left, Fotis Kouvelis in the morning to gauge support for a three-way alliance with their traditional conservative rivals.With Greece just weeks away from running out of cash and a new government needed to negotiate the next instalment of funds from lenders, Greek political leaders appeared determined to avert the deadlock that followed an inconclusive vote on May 6."I am optimistic that this time they will agree to form a Government," a Greek banker who declined to be named told Reuters."They have realised that there is no margin of error or further delays. A third election would be a disaster."With New Democracy taking a 50-seat bonus under Greek electoral law for coming first, a New Democracy-PASOK alliance would have 162 seats, a majority in the 300-seat parliament.Adding the Democratic Left would give it 179 seats.Nation in crisis A difficult road lies ahead for Samaras, a US-educated economist who went to college with former Socialist Prime Minister George Papandreou.He inherits a nation in deep social and economic crisis, with an economy in its fifth year of a recession that has left one in five workers out of a job.A rising number of businesses are closing down, the number of homeless on the streets is growing and anger at austerity cuts is at boiling point.Samaras promised Greeks and prospective partners that he would water down the painful terms of the EU/IMF bailout."We will simultaneously have to make some necessary amendments to the bailout agreement in order to relieve the people of crippling unemployment and huge hardships," he said.Samaras campaigned on promises to cut taxes as well as raising unemployment benefits and pensions.The New Democracy official said the new Government would aim to accelerate and broaden a privatisation programme to top up state coffers, but also ask its creditors to spread 11.7 billion euros of further austerity cuts over four years instead of two.But any attempt to veer off the prescribed austerity path would not sit well with European partners already irritated by what they see as the slow pace of Greek reform.Germany, Europe's paymaster, has ruled out more than minor delays to some targets in the 130-billion-euro rescue package.Chancellor Angela Merkel said at a meeting of G20 leaders in Mexico that any loosening of Greece's agreed reform promises would be unacceptable and reiterated that Athens had to stick to its commitments.With an emboldened SYRIZA bloc led by former communist student leader Tsipras at the head of a powerful opposition, the new government could face protests soon after taking office.SYRIZA almost doubled its share of the vote since the previous election on May 6.