G-20 leaders face pressure to stem Eurozone crisis

LEADERS of the world’s biggest economies are facing pressure to take decisive action to quell the Eurozone crisis at a summit meeting starting Monday, even as they tamp down expectations and brace for Greece to cause more turmoil.Amid widespread anxiety over the Greek parliamentary vote Sunday, the Group of 20 leaders, representing nations that account for nearly 90% of the world economy, will gather for a two-day summit in Los Cabos, Mexico.Expectations are about as low as ever for aG-20 summit. What can this self-appointed steering committee for the global economy do?“Nothing! The G-20 cannot take any real decisions” on the Eurozone problem, said Mario Baldassarri, chairman of Italy’s Senate Finance Committee, in a telephone interview. “They cannot take a decision that has to be made in Europe.”Even the agenda looks uncertain. Everybody is waiting to see what happens the day before in Greece, a country that makes up less than 0.5% of the global economy. Greeks will cast ballots for what is widely seen as a referendum on whether their debt-stricken country remains in the Eurozone or leaves the 17-nation, single-currency union.The results of Sunday’s vote will provide a hint of the path ahead, but it may be days before a new government is formed, leaving critical questions unanswered for the G-20 summit leaders. Will Greece test Germany’s resolve and try to renegotiate the terms of its bailout? Will the dangerously high borrowing costs for Spain and Italy ease? Will there be more bank runs?“The situation will be one of absolute acute uncertainty,” said Jacob Kirkegaard, a research fellow at the Peterson Institute for International Economics.Experts worry about the consequences of a possible Greek exit from the Eurozone at a time when the global outlook has been dimmed by the slowdowns in China, India and Brazil as well as the anemic recovery in the United States.Europe’s troubles are weighing on American confidence and job growth, jeopardizing the U.S. recovery and President Obama’s reelection chances. Obama is likely to keep up the pressure on European leaders, especially on German Chancellor Angela Merkel, to promote growth.But Merkel has shown little inclination toward making the kind of pivot to stimulus from belt-tightening that Obama and other countries are seeking. On Thursday, she again ruled out the idea of creating euro bonds to share the Eurozone countries’ debts, saying, “Germany’s resources are not unlimited.”Britain announced plans to flood its banking system with funds in an attempt to shield its economy from shocks. Global investors, meanwhile, are hoping for a coordinated response from central banks around the world, including the Federal Reserve, as they did in the darkest days of the 2008 financial crisis.