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October 28, 2021

G-20 or where is the EU headed?

If there was still any need to prove that we are living moments of grave political, financial and economic crisis in Europe, it suffices to just mention a few of last week’s highlights, all questioning the solidity of the European construction the edification of which began over 60 years ago. While on Thursday, October 28, the EU had agreed on a package designed to save Greece from the disaster of its sovereign debt (and the Greek PM had agreed to it also),  last Monday (October 31), the same PM, Georgios Papandreou all of a sudden announced a national referendum on the bail-out plan. Financial markets as well as European governments and outstanding EU leaders immediately started showing signs of panic. It was expected that the Greek voters would say ‘No’ to the austerity plan followed by the country’s exiting the euro-zone and perhaps even the EU. On the other hand, Papandreou’s announcement coincided with a massive comb-out operation of the Greek army leadership, causing international media to speak of an imminent military coup forestalled in the last minute.

Europe was getting ready for the G-20 summit in Cannes when the news about the Greek referendum practically set international markets afire. An almost inconceivable scene happened when the ‘world economy government’ – G-20 – started its works in Cannes, on Thursday. All 20 leaders of the planet representing states where 90 per cent of the global wealth is concentrated, were seated in front of a huge screen watching the debates going on in the Hellenic Parliament where PM Papandreou was explaining the rationale of his decision and what he though he should do. He had already been convinced by the Franco-German pressure to renounce the referendum. An almost implausible scene, but one that speaks volumes of the big inter-dependence characterising the current global economy. Because a derailment of Greece would not just mean the collapse of the euro, but also the immersion of the hole planet into an unprecedented economic crisis.

A highly critical attitude was already growing in Italy on the eve of the Cannes summit towards the EU ‘big ones’, who – the foreign minister of the peninsula deemed – were purposefully trying to push Italy into a financial and economic crisis with their inadequate statements (especially identified with the French president). The G-20 summit took place on Thursday and Friday while news was coming from Athens’ way suggesting the Greek Government was considering renouncing the announced referendum following the EU’s decision to suspend its financial assistance. On the other hand, the summit was a good opportunity for another suddenly emerging – yet long expected – issue to be discussed: the threatening whirlpool of Italy’s debt and the prospect of the country’s default. Under the pressure of the Cannes summit, Italy had to accept the monitoring by the International Monetary Fund in what concerned the implementation of its austerity plan and the tidying up of public finances. The G-20 summit practically turned into a meeting discussing the EU crisis.

So two European countries came to the attention of the international markets in just one week, revealing the extremely difficult circumstances of the EU and the existential distress of the European organisation. Will the euro-zone resist this crisis or are we going to witness cascading voluntary exists of states that will choose to go back to the currencies they cast aside over a decade ago? Will it be the signal for the collapse of an organisation unable to provide its own consistency in the absence of a tighter political and fiscal union? Will the global economy be hit by the impact of such developments or will Europe act at last?

The comments in the international mass-media immediately signalled the reality. An American economist, Paul Krugman, was expressing on his blog last Tuesday (November 1) his scepticism about the survival of the euro-zone under the night-mare headline – ‘Eurodammerung’. His scenario was considering that the next country to be hit by crisis was going to be Italy – already confirmed – and France – on hold.

Under such conditions, it was but clear that the G-20 summit would have needed to focus on European issues and best ways to solve this crisis of unprecedented seriousness. One of the mentioned measures has already been taken, Italy being placed under IMF and EC supervision. Still, beyond all such measures, it was again clear – and it was pointed out to Europe by the attending world leaders – that this is no way to go on. The EU has actually shown that, by successive postponements of necessary decisions, it had failed to take effective action In order to prevent a contagion spreading from Greece to Italy and possibly beyond. The message sent to Europe by those leaders was unequivocal: you need to put your economy in order unless we all want to take the risk of plunging into a global recession and you will just need to do it yourselves. Perhaps not putting all the burden of decision on the shoulders of France and Germany, but in a different and effective way that would empower the entire EU.

As the international media comments, the European weakness as well as the lack f action on behalf of the USA to the problems of its allies – it’s not the first time after WWII that Europe is left to deal with its issues without Washington giving guidance and support, for whatever reasons – made room for other ‘stars’ at Cannes. China was regarded as the ‘banker’ Europe expected and is the third biggest IMF sponsor with a good chance of becoming the second biggest after the USA really soon and other emergent economies such as Russia, Brazil etc. also prove major global shifts in the area of global economy.

Of curse, it doesn’t mean that G-20 did not go through its pre-established agenda. British PM David Cameron presented his global governance report, considering the setting up of a secretariat general of the organisation (only backed by France), Bill Gates reviewed all possible taxes that would promote growth (tobacco, transports, etc.), to which European Commission President Jose Barroso added the possibility of introducing a tax on financial transactions. The presidents of Brazil and Mexico on the other hand raised the issue of under-evaluated currencies. Nonetheless, the summit unfolded under the imperative of an urgent action of identifying a solution to the European crisis. It only proves that the global economy needs the organisation and the stability that it brings along in order not to face a global recession with incommensurable consequences.

It is now the job of Europe and of its bicephalous Franco-German leadership to identify before it’s too late the way to go in order to save the EU and global economy.

A final word also on how history acceleration takes place today. After the EU summit of October 28, 2011, agreeing on a solution for salvaging Greece, French President Nicolas Sarkozy practically launched the presidential election campaign in France with a TV interview. It was expected to triumphantly continue with the G-20 summit in Cannes scheduled just a week after. President Sarkozy’s performance during the G-20 summit might have convinced the French voters of the fact that the European and global leadership proven by the 2012 candidate for the seat at Elysee qualify him for another seven years at the helm of France. But at Cannes developments took different turn.

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