20 October 2011

European Voice: The EU, not the G20, must settle eurozone crisis

The date of the G20 summit in Cannes on 3-4 November has become a deadline for the eurozone to sort out its sovereign-debt crisis. While it is true that the EU has contrived to turn the debt crisis into a source of instability for the entire global economy, the G20 is not the means of global governance that its champions wanted it to be.

Judged by more than one meeting, the G20 is doomed to disappoint. The ineffectiveness of last weekend's G20 finance ministers is the norm. The group is too large for effective decision-making, particularly because its members have such disparate interests.

But if the creation of the G20 has done anything, it is to permit the perpetuation of the G7. The demands for root-and-branch reform of the G7 would be unstoppable if the G20 did not exist. As it is, the leaders of Europe's largest nations are condemned to an endless round of summitry – EU, G8, G20, UN, etc, etc – whose value does not match the expense.

When they meet in Brussels on Sunday (23 October), the leaders of the EU's 27 Member States should not kid themselves that the G20 stands ready to resolve any questions that they fail to answer. The G20 is a deadline, but not a second chance, and ducking out on Sunday is not an option. The EU has to use its own decision-making machinery – of which Friday and Saturday's meetings of finance ministers are an example – to resolve the difficult issues.

Although some people, notably spokespeople for the German government, have been trying to play down expectations ahead of Sunday, the eurozone's trading partners – the US and, less vociferously, China – have worked out that the stakes must be raised to ensure that Europe does not run away.

The eurozone has to come up with credible answers – to the immediate problem of Greece and a possible default, to the broader challenge of how to harness enough lending power to ward off debt contagion, and to questions about the capitalisation of European banks. If Sunday's meetings do not come up with plausible responses, then the deadline of the G20 meeting will be irrelevant. By the time the summitry moves to the French Riviera, the financial markets will have delivered a merciless verdict.

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