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Tags: World | Leaders | Revive | Recovery

World Leaders Aim to Revive Global Recovery

Monday, 31 October 2011 02:52 PM

World leaders will try to understand how the economy has swerved so horribly off its recovery track when they gather this week for a summit that will see a curious inversion of roles from previous meetings: Europeans will be asking developing countries in Asia and South America for financial help.

Though signs of an alarming slowdown in growth are everywhere — the U.S. is not creating enough jobs and China is struggling to cool down inflation without triggering a credit crunch — the old continent's debt problems will take top billing at the summit.

As head of France's year-long presidency of the Group of 20 meetings, Nicolas Sarkozy will scramble to show his peers gathered at the chic French Riviera resort of Cannes that Europe got a grip of its debt crisis with last week's grand plan to save the euro.

One of the main ideas behind creating the G-20 three years ago was to expand global economic decision-making beyond the North Atlantic axis to include more diverse countries. But this year's G-20 summit, to be held Thursday and Friday, is all about old Europe. And instead of Europeans offering aid to struggling nations, as occurred in the past, now the Europeans are asking developing nations with big cash reserves — like China — for financial help.

Eurozone leaders, for their part, have preventively dodged questions on details of their latest euro rescue operation, saying last week that the mechanics won't be settled until early December — almost six months after their previous plan was announced and then left to slowly go past its expiration date.

European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy last week pledged to carry out the new measures "rigorously and in a timely manner."

"We are confident that they will contribute to the swift resolution of the crisis," Barroso and Van Rompuy wrote in a joint letter to the G-20 leaders.

"Swift" may not be the right word after two years of faltering half-steps and missed opportunities. Meanwhile, European leaders must use the face time with colleagues from Brazil, Russia, India, China and beyond to drum up interest in the 440 billion euro ($616 billion) European bailout fund. Increasing the fund's firepower by getting cash-rich developing world countries to invest in bonds insured by the fund is key to the European plan's success.

If recent comments by the head of China's sovereign wealth fund are anything to go by, convincing outsiders of Europe's investment potential will be a hard sell.

Jin Liqun, chairman of the board of supervisors of the China Investment Corporation said "the root cause" of Europe's trouble is "the overburdened welfare ... the sloth-inducing, indolence-inducing labor laws," he said. "People need to work harder. They need to work longer," Liqun said.

China's president also suggested the Europeans should not count on being bailed out by China's record foreign currency reserves.

Speaking during an official visit to Austria, President Hu Jintao told reporters Monday his country is closely following the EU's economic development.

"We are convinced that Europe has the wisdom and the competence to conquer its momentary difficulties," he said during an official visit to Austria.

Beijing so far has promised to help only by continuing business as usual, trading with Europe and stockpiling some of China's multibillion-dollar trade surpluses in the safest European government bonds.

Serving as a gloomy backdrop to the Cannes summit are new data that show Europe's economy will stagnate or even contract next year.

In comments timed to coincide with the G-20 summit, the OECD said "patches of mild negative growth" are likely in the eurozone in 2012.

It said economic growth in the eurozone will stall at 0.3 percent next year, after just 1.6 percent growth this year. That's down from the OECD's forecast in May of 2 percent growth in the eurozone in 2012.

The Paris-based OECD also implored the EU to provide more details on how its plan to rescue the euro will work.

The OECD said much of the blame for the current economic slowdown was down to "a generalized loss of confidence in the ability of policymakers to put in place appropriate responses."

That reads as a slap to European leaders who've attempted for nearly two years to get a grip on the widening sovereign debt crisis beginning in Greece that has drawn in Ireland and Portugal and now threatens Italy and Spain.

Eurozone crisis measures unveiled last week "go in the right direction," the OECD said, but it called on European leaders to provide more specifics on how their plan will work.

While this week's G-20 summit is expected to focus heavily on financial issues, it is also likely to touch on topics such as coordinating climate change policies, maintaining energy supplies as well as security issues.

© Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

World leaders will try to understand how the economy has swerved so horribly off its recovery track when they gather this week for a summit that will see a curious inversion of roles from previous meetings: Europeans will be asking developing countries in Asia and South...
Monday, 31 October 2011 02:52 PM
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