The G-20 Farce to Save The Eurozone From Collapse

The first summit of the G-20 in today’s configuration took place in November 2008 in Washington, DC, during the heady days after the Lehman collapse. Before, it was limited to finance ministers. Since then, twice a year, 19 heads of state, the President of the EU, finance ministers, the heads of the IMF and the World Bank, a gaggle of central bankers, and a whole slew of lesser characters get together to solve the problems of the world.

G-20 summits have a checkered history of accomplishments though they don’t lack in grandiose announcements. At the summit in London in April 2009, French President Nicolas Sarkozy announced with fanfare, “The era of bank secrecy is over.” Its big accomplishment: a blacklist of tax havens. And a whole new game of political football, namely deciding which country would get to see its name on the list and which wouldn’t. Yet, tax havens have since sprouted around the world far faster than President Obama’s “green shoots.”

But the crowning achievement was the G-20 summit in November last year in Cannes, France. At the beginning of the week, participants were still thinking that their sojourn in the ritzy town on the Côte d’Azur would be a relaxed affair of photo ops, handshakes (or stiff air kisses between German Chancellor Angela Merkel and Sarkozy), and fancy dinners, interrupted by rubber-stamping with great hoopla the previously negotiated Grand Plan to bail out Greece, or rather its public bondholders. It was its second bailout package, and it would be huge and solve all problems once and for all. And in between, attendees would also put Italy back on some kind of unspecified track though Prime Minister Silvio Berlusconi was mired up to his neck in legal problems while his country’s finances were spiraling out of control. And with the summit being heavily mediatized in France, Sarkozy would make it his jump-off platform for his reelection campaign, demonstrating panache, leadership, and crisis management skills.

Just then, Giorgios Papandréou, Prime Minister of Greece, who wasn’t even in the G-20, fired his bazooka. With a single sentence about letting Greeks decide via referendum whether or not they wanted that Grand Plan, he knocked the world’s financial markets into a vertigo-inducing tailspin—which blew up the summit.

The final communique was a bland slop that talked about a “worldwide strategy” for growth and employment, a “more resilient and stable monetary system,” and once again “reforming the financial sector.” It suggested that the world would need to get a grip on the “volatility of commodity prices,” as well as “promote agriculture,” and continue “the fight against climate change.” Meanwhile, the Eurozone had begun to disintegrate.

So they all arrived at the current G-20 summit in Los Cabos, Mexico, with their own agendas. While tiny Greece is still front and center, the summit has been escalated: bailing out Greece wouldn’t be enough. Now it would be about bailing out the entire 17-nation Eurozone and its currency. And even broader. President Obama made his agenda clear: he wanted everybody else to do “what’s necessary to stabilize the world financial system.”

But the finger-pointing already started. “Frankly, we are not coming here to receive lessons,” said European Union President Jose Manuel Barroso. Lest the most powerful man on earth should forget, Barroso added that the euro debt crisis “was originated in North America.” Presumably, if it hadn’t been for US subprime mortgages blowing up, Spain’s housing bubble could have continued ad infinitum, along with Greece’s profligate ways, and the debt crisis wouldn’t even exist. “But we are not putting the blame on our partners.”

Indeed, President Obama is going to be busy handing out lessons. There will be Russian President Vladimir Putin on Syria and Iran, Chinese President Hu Jintao on the yuan, and of course Merkel. Obama will push her to hand Greece unlimited amounts of money, bail out Spain and Italy while she is at it, and do whatever it takes to bail out the Eurozone as a whole. She would also have to calm the markets. But above all, she’d have to make sure that none of this euro effluent would cross the Atlantic and muck up his reelection chances.

Merkel, whose patience is running thin these days, has already preempted any unnecessary hopes Obama might have had by declaring, once again, for those who’d missed it the first 33 times, that the bailout terms wouldn’t be renegotiated and that the new Greek government would have to meet the commitments made to international lenders. And on the eve of the election, she’d expressed her exasperation with the Greek method of “making promises, breaking promises, and doing nothing.” It simply could not continue, she said, that those who didn’t fulfill their commitments could lead all others “by the nose through the ring.”

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