Europe seeks US, China quid pro quo at G20

30th October 2011, Comments 0 comments

The Group of 20 major economies come to the French Riviera this week, with Europe out to make the most of its debt crisis deal to demand its partners now do their bit for the world economy.

At the G20 meeting in Cannes Thursday and Friday EU leaders will meet up with the United States, China and others who have been pressing them to put their house in order for the benefit of all.

The initial reaction to the eurozone accord has been positive.

Markets were happy to see a Greek debt restructuring, help for the banks to cope with any resulting losses, support for other EU countries struggling with debt and plans to boost the euro rescue fund.

Now comes the detail, however, of how to implement to make sure the debt crisis is tamed and that other struggling economies such as Italy and Spain are safe from contagion.

"We welcome the important decisions... by the European Union which lay a critical foundation for a comprehensive solution to the eurozone crisis," US President Barack Obama said of the accord.

"We look forward to the full development and rapid implementation of their plan," he added.

To make the point for the Cannes meeting, White House spokesman Jay Carney said "the president's message to the EU and broadly to all the members of the G20 is that we need to work individually... and collectively together" to put the global economy back on track.

China said Friday it would seek more clarity before investing in the revamped euro bailout fund as Klaus Regling, head of the European Financial Stability Facility, held talks in Beijing to try to win help from the world's second-largest economy.

Chinese state media said, however, that Europe had to take responsibility for the crisis and not rely on "good Samaritans" to save it from its fiscal woes.

"We need to wait for the technicalities to be clear and also to carry out serious studies before we can decide on investment," Chinese Vice Finance Minister Zhu Guangyao said.

For their part, EU leaders, having worked so hard to get their debt accord, seem ready to give as good as they get over what to do about a stalling global economy, widespread debt elsewhere and deep-seated imbalances between, for example, the US and China.

"We are not the only ones with problems," a senior EU official said.

"The others have to deliver too," he said, referring to Washington's runaway debt and calls for China to use its surpluses "to spur world growth."

G20 partners want China to stimulate domestic demand, diversifying its all-conquering export-led economic model and finally allowing the yuan to appreciate freely so as to slim down its massive trade surpluses.

"We will be very sharp with the others," the EU official said of the G20 talks aimed at committing member states to coordinated action to save the global economy.

But a diplomat with one of the four main EU states commented that "this kind of language has to be expected before they go in."

The talks in Cannes have many sub-themes, but even down among the detail, agreement on the flow of scarce raw materials -- an issue given huge Chinese investment in mining and metals in Africa and elsewhere -- could prove difficult.

"They have not yet found consensus," the EU official said.

Analysts have given Europe's leaders credit for hammering out the grand lines of a response that Belgium's Prime Minister Yves Leterme said was the first time in two years the EU had shown it was "running ahead of the crisis."

But political hackles were raised by the decision to turn for cash backing to China and other emerging rivals such as Russia and Brazil.

Francois Hollande, the Socialist challenger in next year's French presidential election, led the criticism.

Did the EU really expect Beijing to ride to the rescue "without making any demands in return?" he asked.

Already owners of major Greek ports, the governor of China's central bank, which sits on a $3.2-trillion pile of foreign currency reserves, has raised the possibility of investing in Europe's banks.

Belgium's Dexia is already under nationalisation and others too are set to lose influential stakes to states, under a 106-billion-euro recapitalisation target simultaneously agreed by EU leaders.

© 2011 AFP

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