Posted by: mulrickillion | October 15, 2011

The G20’s Eurozone Problem

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People walk near the French Economy, Finance, and Industry Ministry before the start of the G20 Finance Ministers Summit in Paris. (Charles Platiau/Courtesy Reuters)

By Christopher Alessi, Analysis Brief, Council on Foreign Relations (CFR)

October 14, 2011

G20 finance ministers, meeting in Paris this weekend, are expected to continue a growing international effort to pressure European policymakers to contain the eurozone sovereign debt crisis and limit contagion to an already-strained global economy. The meeting comes a day after Slovakia (DeutscheWelle) became the final eurozone member to ratify expansion of the temporary eurozone rescue fund–the European Financial Stability Facility (EFSF)– in conjunction with plans for a second Greek bailout agreed upon by EU leaders in July.

Still, those measures are already criticized as insufficient to stem contagion to other indebted eurozone states and to the continent’s banks. G20 ministers will be looking to their EU counterparts to present a more comprehensive plan to "ringfence" Greece, while organizing an orderly restructuring of its debt, and protecting Italy and Spain from sovereign default, Fredrik Erixon, director of the European Center for International Political Economy, told CFR. Credit rating agency Standard and Poor’s downgraded Spanish debt (Telegraph) by one notch on Friday.

Government officials on both sides of the Atlantic have emphasized the high stakes of this weekend’s meeting. A French official told Agence-France Presse on October 13 that the G20 must agree on how to stabilize the eurozone or face significant consequences to the world’s economy in the coming months. Lael Brainard, undersecretary for foreign affairs at the U.S. Treasury Department (CNN), said on October 12 that the eurozone debt crisis "represents the most serious risk to the global recovery today." Brainard underscored that Treasury Secretary Timothy Geithner will urge his EU counterparts at the G20 to act forcefully.

But that may be all Geithner, or any other finance minister, can do. Experts do not anticipate a final roadmap for the eurozone to emerge from the G20 finance ministers gathering. EU officials will use the meeting to brief their non-European colleagues on their progress and solicit feedback, Domenico Lombardi, president of the Oxford Institute for Economic Policy told CFR. Eurozone leaders will then formally debate any proposals at the European Council summit on October 23. But a final outline on eurozone stability is unlikely until the G20 summit on November 3-4 in Cannes, Lombardi says.

EU leaders remain divided over how to assist Greece and how to shore up European banks. . . .

The G20’s Eurozone Problem – Council on Foreign Relations

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