DIFFERENT CITY, same problem. G20 leaders gather for a summit in Cannes today to discuss the ailing state of the global economy. Contrary to their every wish, Europe’s expanding debt crisis will dominate.
Cannes is in lockdown. Thousands of armed police have cordoned off the main thoroughfares, residents have been issued with security passes, vast yachts remain tethered to their moorings. As motorcades whooshed up and down the deserted Croisette yesterday evening, the place seemed eerily vacant.
This was the summit at which the chieftains of the world economy were supposed to redouble the effort stave off a new global recession. Instead, they’re trying again to figure out what to do about Greece. The country is not a member of the group of 20 largest developed and emerging nations but its unpredictable debt drama carries risks for them all.
So it was that French president Nicolas Sarkozy, who chairs the summit, told key euro zone figures to come early to Cannes.
Two days after Greek prime minister George Papandreou unexpectedly called a referendum on the bailout, his counterparts are still looking for answers. It is an utter mess and the stakes are rising all the time.
Around the table were Sarkozy, German chancellor Angela Merkel, International Monetary Fund managing director Christine Lagarde, euro group president Jean-Claude Juncker, European Council president Herman van Rompuy and European Commission president José Manuel Barroso. The new ECB president, Mario Draghi, was in Frankfurt preparing for his first rate-setting meeting today.
It a measure of how quickly things are moving in the euro zone that this particular conclave of leaders, which first met a fortnight ago, has come to be known as the “Frankfurt Group”. In the run-up to the first of two emergency euro zone summits, they met in the German city on the margins of an event to mark the retirement of Draghi’s predecessor, Jean-Claude Trichet.
They have spoken many times since, and came together again at teatime yesterday. They were to be joined by Papandreou and his finance minister, Evangelos Venizelos, at about 9pm. Another late night was in store.
Blindsided by the referendum plan, Greece’s sponsors were looking for clarity on three fronts.
First, they wanted Papandreou to explain what referendum question he proposed asking his people and when.
Second, they wanted to hear from him what he proposed doing if the referendum was lost.
Finally, they wanted to know if Papandreou intends sticking to the terms of the rescue plan he agreed to accept only a few days ago in Brussels.
No matter what his answers were, Papandreou was still facing an ultimatum from his sponsors.
Although his plan was to hold the referendum in January, they were set to direct him to bring forward the vote by a month. By way of not-so-subtle encouragement, sources briefed on the talks said he would be told that Greece would not receive an €8 billion bailout loan until a positive referendum result.
In Europe’s calculation, Athens has enough cash for public pay and pensions until mid-December. This would be the deadline for the referendum.
This is hardly an edifying way to run a currency, but it is a measure of the anger Papandreou has provoked.
As for the referendum question itself, many in Europe favour a simple “Yes” or “No” as to whether Greece should stay in the euro. That is seen as the “least worst” option. Opinion polls show most Greeks, although they bitterly oppose the austerity which has gripped the country, they favour staying in the single currency. Nothing can be taken for granted, however.
Whatever the question, the greatest imponderable is what happens if the referendum is voted down. This is the nightmare scenario. It would appear any reassurance Papandreou or Venizelos offered would be speculative and subject to the whims of volatile politics in Athens. The government faces a confidence motion tomorrow.
All told, the pervading sense of uncertainty in Cannes is quite the opposite of what Europe’s leaders had hoped to convey to the world. The G20 summit was the deadline for a comprehensive new solution to the debacle. If only.
