With a Greek economic crisis matched only by its internal political turmoil, leaders from the world's 20 leading nations scrambled yesterday (3 November) in Cannes to insulate themselves from the next most European vulnerable economy, Italy.
French President Nicolas Sarkozy, the host of the G20 meeting, made no secret that the problems of the eurozone had taken centre stage at the summit, initially planned to identify solutions to boost the world economy.
With a scenario of Greek bankruptcy no longer seen as taboo, Italy became a prime concern at the summit.
In Cannes, Italian Prime Minister Silvio Berlusconi was urged to take urgent steps to reassure markets and slash its crippling debt mountain. The Italian leader was set to leave the summit early on Friday, facing mounting calls to quit and a rebellion within his own centre-right party.
Berlusconi arrived empty-handed at the summit, as he failed on Wednesday to win full cabinet support for a new set of reforms aimed at boosting growth and cutting Italy's massive debt.
Speaking to the press, Sarkozy said that the question leaders asked Berlusconi was: "Will this package be implemented?"
"We cannot accept the explosion of the euro which would mean an explosion of Europe. The problem should be formulated in those terms and in no other way. If the euro is the heart of Europe, the explosion would make Europe explode," Sarkozy said.
Berlusconi informed his European partners Thursday that he would call a confidence vote within 15 days on the measures.
In the meantime, Greek Prime Minister George Papandreou announced upon his return to Athens that he was prepared to resign if Parliament agrees to the bailout package agreed at the eurozone summit of 27 October. This latest turnaround in the Greek debt tragedy comes after Papandreou announced he had abandoned the idea of holding a referendum on the latest aid package to Greece, infuriating EU leaders and rattling markets.
Russian President Dmitry Medvedev called the Greek position "extravagant", and according to his words, it had been changing several times over the day.
"Our colleagues have a headache [on] the situation in Greece, but also Italy, Spain. It is clear that Greece is only the weakest link, but actually there are other countries coming under the shock," Medvedev said.
Doubling the IMF's funding capacity
US President Barack Obama said that the most important crisis was in Europe and that his country would give a helping hand. But he added that the G20 must first "flesh out the details" of its support to Europe and then ensure the plan is implemented "fully and decisively."
A deal expected to be finalised today (4 November) could see the International Monetary Fund (IMF) double the size of its funding capacity.
Britain for one is poised to provide billions of pounds for a new global economic rescue package. “When the world is in crisis, it is right that you consider boosting the IMF, the International Monetary Fund, an organisation founded by Britain in which we are a leading player," British Prime Minister David Cameron said.
To reassure the UK audience, he added that no government had ever lost money by lending money to the IMF that supports countries around the world.
“But what we wouldn’t support is the IMF investing directly in some euro bailout fund. That wouldn’t be right and we won’t back it, so there is no risk to British taxpayers of seeing the IMF play its proper role; that’s what we have always supported,” Cameron said.
China has been asked to help in the process by investing some of its $3.2 trillion (€2.3 trillion) in foreign exchange reserves in the bailout fund. But Deputy Finance Minister Zhu Guangyao, said it was too early to talk about China's involvement, Reuters reported.
In his speech, Chinese President Hu Jintao said the world economy was now at a "crossroads" and global economic governance faced "arduous tasks".
"It is imperative that we stand on a higher plane, transcend differences on specific issues, move beyond short-term considerations, and jointly seek ways to overcome the crisis and sustain development," Hu said.
China is believed to put pressure on the EU to give it the status of market economy, which would reduce the tariffs for Chinese products sold in the eurozone.
Hu also played down the chance of allowing the value of the yuan to rise, contradicting more optimistic remarks by the US.