The G20 summit ended in disarray without additional outside money to ease Europe’s debt crisis and new jitters about Italy clouding a plan to prevent Greece from defaulting.
In the end, only vague offers to increase the firepower of the IMF — at some later date — were all the eurozone leaders were able to take home on Friday after two days of tumultuous talks.
With their own finances already stretched from bailing out Greece, Ireland and Portugal — and the US and other allies wrestling with their own problems — eurozone countries had been looking to the IMF to help line up more financing to prevent the debt crisis from spreading to larger economies such as Italy and Spain.
Italy’s fate in particular is crucial to the eurozone because its economy — the third-largest in the currency union — would be too expensive to bail out. The implications for the world economy are stark: The debt crisis that has rocked the 17-nation eurozone threatens to push the world economy into a second recession.
European leaders could point to one potential catastrophe averted: They stared down Papandreou and berated him into scrapping a referendum. Greece’s politics are in upheaval as a result, but the shaky bailout plan appears back on track — for now.
“We want Europe to work,” French President Nicolas Sarkozy said on French TV when the summit was over. “I think today we can have confidence ... but that’s not to say our troubles are behind us.”
The Greek question completely derailed Sarkozy’s aim of using the summit to show that Europe had sorted out its debt problem — and possibly convince some of them to pitch in to the rescue effort.
Now Europe’s leaders might find it is impossible to take back the shocking admission by Sarkozy and German Chancellor Angela Merkel that an exit by Greece from the eurozone was no longer unthinkable.
Even as US President Barack Obama, Chinese President Hu Jintao (胡錦濤) and other leaders struggled to make sense of the Greek drama’s fast-shifting plot, another flashpoint emerged in Italy.
Market confidence in Italy’s ability to reduce its public debt and spur growth in its anemic economy has withered as the government weakened. Lawmakers have defected to the opposition and some of Italian Prime Minister Silvio Berlusconi’s ministers have openly suggested the government’s days might be numbered.
Market fears mounted on Friday in the wake of the confusion about Greece. Italy’s benchmark 10-year bond yield jumped 0.32 of a percentage point to 6.43 percent. The need to reassure bond markets led Italy to agree to submit to IMF scrutiny.