Emerging markets to Europe: Fix it!
Emerging markets like China and Brazil, as well as US, are urging European ministers to address its sovereign debt woes. But emerging markets, US lack consensus on solution.
Europe will come under heavy pressure this week to stem its deepening debt crisis but talks among the self-proclaimed guardians of global finance are unlikely to yield bold action.Skip to next paragraph
Subscribe Today to the Monitor
Spreading fears about a Greek debt default and contagion to larger economies in the euro zone have raised alarm in the United States and among emerging market heavyweights about the risk of a potentially major shock to an ailing global economy.
At talks among the Group of 2O major economies and at the International Monetary Fund in Washington, the United States and big emerging economies such as China, Brazil and India are likely to join the IMF and call on Europe to be more decisive.
But with U.S. political leaders divided on how to fix their own economic problems and no sign of consensus among the so-called BRICS emerging economies on how to help, the chances of a new approach to righting the global economy look slim.
``The G20, all it can do is to provide some peer pressure on the Europeans, to sensitize the Europeans to the huge scope for spillover that the euro crisis is already having,'' said Domenico Lombardi, a former IMF official and a senior fellow at the Brookings Institution in Washington.
``We should not expect any type of international response along the lines we saw at the height of the financial crisis.''
EUROPE FOCUSES ON FISCAL CONSOLIDATION
Underscoring the gravity of the situation, U.S. Treasury Secretary Timothy Geithner attended both. He was received coolly by EU officials meeting in Poland, when, according to participants, he urged wealthier states -- in particular Germany -- to do more to support growth and suggested leveraging euro-zone bailout funds to give them more clout.
European ministers continue to say that belt-tightening remains their priority. German officials on Tuesday said they will stress the need to cut deficits at this week's talks.
The EU intends to shift the spotlight elsewhere. It will call on China to boost domestic demand and the United States and Japan to tackle their public deficits, according to a document obtained by Reuters.
This would help rebalance global growth, the EU said -- a key agenda item for the G20 since it emerged as the premier economic policy forum during the 2007-2009 financial crisis.
Canadian Finance Minister Jim Flaherty on Tuesday expressed frustration at Europe's slow pace in dealing with the crisis and called on officials to ensure European banks are adequately capitalized.
``There's risk and there's increased risk the longer this matter is delayed. We've been talking about Greece since January 2010 and the euro zone has not yet brought the matter to a conclusion,'' Flaherty told reporters in Ottawa.
He said Canada had fiscal room to maneuver, but would open its coffers for new stimulus only if hit by an external shock.
Ministers will have little time at the G20 meeting to make their points as the agenda is largely devoted to development issues, with just a dinner on Thursday earmarked for discussion of threats to the global economy.
The only G20 statement is expected to come on Friday after a meeting on climate change, sustainable agriculture and infrastructure financing in developing economies.