How can the G20 help save the euro zone?

The notion the G20 might extend national credits to help cover excessive Euro-debt got nowhere.

The G8 became ineffective because China, India, and Brazil weren’t in it. The G20 looks ineffective because China, India and Brazil are in it, very defensively.

 The IMF can extend some supervised credit. But this multi-layered crisis is Europe’s to solve.

Solutions are discussed only on surface layers covering debt issues. Lasting solutions require going deeper down to correct existential defaults of EU governance. Without a common fiscal policy for members, the Euro will remain distrusted. But from Day One, political leaders kept taxation power in their national Parliaments to permit pursuit of differing political/electoral agendas.

Can politicians finally together confront the unaffordability of Europe’s high-pension social model against low growth and birth rates and aging populations? “We all know what we have to do,” said Jean Claude Junckere, PM of Luxembourg. “The problem is getting re-elected afterward.” So it goes.

Email

Share

It’s sad but true that Europe seems to act most effectively when under pressure from outside forces. The analog is the way that IMF governance reform was handled. Everyone involved knew that the goal was to give the emerging economies more seats on the Board; and that to make that happen, Europe had to give up some percentage of its over-representation. In round after round of negotiations within Europe, the Europeans couldn’t come up with a formula or agree among themselves. So the negotiations moved to the G20. There the Americans worked with the Chinese, the Indians and the Brazilians to push the Europeans to agree to a sensible reduction in European seats; and agree they eventually did. The episode was humiliating for many within Europe, but they made their bed. Now, we’re facing a similar dynamic, just with far more urgency: Europe needs G20 pressure to actually complete a detailed rescue package. China and other outside actors might end up contributing to a fund, via the IMF, but that will be secondary. Europe will have to provide the bulk of the response. That it needs G20 pressure to do it is further proof that Europe is only a semi-power on the international stage. 

Email

Share

This is largely an intra-European problem, and thus will have to be sorted out primarily by the Franco-German “alliance” with help from the other, smaller EU members. 

The G20 have, and should, focus on the systemic implications of the current problems, through moral suasion and lending where it’s possible (viz. China) and in national/systemic interests of each G20 member. As a group, the G20 should suggest further co-ordination of policy to lay the basis for sustainable growth.

Email

Share

The question presupposes that the G20 CAN save the Euro zone. It can’t, although it can make the situation worse by inaction. Unfortunately at this point in its existence, the G20 has little cohesion and is more of an episodic “crisis management” event than an institution that can really do anything substantive. Any substantive response will come from individual countries, hopefully via the IMF where some accepted groundrules apply, rather than the G20. But the G20 does have one advantage: it provides Canada with a ringside seat from which to watch Rome (and Athens, and Dublin…) burn, and a platform from which to lecture the Europeans on their perfidies. If only they all paid their taxes like WE do.

Email

Share