As leaders of the world’s largest economic powers gather together at the G20 Summit this week on the French Riviera (complete with nude sunbathers turned antiglobalization protestors), the world’s attention has once again focused on Greece.
Little did I know back in June when I was decrying the futility of the latest Band Aid solution, that the ongoing Greek debt crisis would still be headlining newspapers the world almost six months later. Yet, that is exactly what’s happened as Europe’s leaders continue to deny, dither, and delay any implementing an ultimate solution to the problem.
Unfortunately—as the financial crisis and ensuing economic stagnation have demonstrated all too clearly—in an interconnected global economy, the failures of one region to get its collective act together puts a considerable damper on growth prospects elsewhere.
Only days after concluding a Eurozone Summit with an agreement on implementing yet another Greek assistance package, leveraging Europe’s bailout fund to quadruple its lending capacity, and once again impress upon the markets that “this time we’re serious,” Europe’s plans were thrown asunder by the actions of its political leaders.
This time the culprit was Greek Prime Minister George Papandreou who expressed a desire to hold a referendum so that the Greek people could weigh in on whether or not Greece should remain in the eurozone –at the cost of a decade or more of stunted growth and harsh austerity. Global markets quickly tanked, realizing that the measure was likely doomed to failure given the increasingly active and violent protests against austerity playing out daily on the streets of Athens.
After being roundly criticized by global leaders, Papandreou flew to Cannes to meet with French President Nicolas Sarkozy, German Chancellor Angela Merkel, and US President Barack Obama where he was presumably vilified for having the audacity to let his people express their views. Just as the cries for Papandreou’s resignation reached a fever pitch, Greece’s opposition leader declared himself and his party ready to support the terms of the EU bailout package—thereby giving the prime minister the political cover and supposed consensus he needed to pull the rug out from under his electorate’s feet and cancel the referendum. One wonders what the reaction of those demonstrating in the streets will be to the news that they are not going to be voting on the plan after all.
As all of this political drama played out, the G20 leaders must have been shaking their heads at the fact that a country which represents less than 5% of the Eurozone’s GDP had once again taken over the agenda of a summit representing the leaders of well over 90% of the global economy.
The G20 represented a rare opportunity to show international economic solidarity. In the just-released communiqué, leaders make reference to their “commitment to . . .reinvigorate economic growth, create jobs, ensure financial stability, promote social inclusion and make globalization serve the needs of the people.” Yet, any neutral observer of the Summit and the surrounding political theatre would find it hard to believe any of this to be true. No action was taken on a financial transaction tax, reforming international monetary agencies to reflect the current global balance of power, or even to assist Europe in raising funds for its Financial Stability Facility—all priorities of the French presidency. It is both sad and frustrating that global leaders have missed yet another opportunity to act decisively, replacing definitive actions with empty rhetoric.
Garrett Workman is the assistant director of the Council’s Global Business & Economics Program.