France Passes G20 Baton after Messy Cannes Summit
France's year-long G20 term stumbled to a messy end at the Cannes summit, where President Nicolas Sarkozy's dreams of reforming world finance were torpedoed by the eurozone debt crisis.
The leaders of the world's most powerful economies cobbled together a list of promised measures to boost growth and reinforce the IMF, but the statement was short on detail and all eyes were fixed on Rome and Athens.
There, Italy's Prime Minister Silvio Berlusconi was forced to accept IMF oversight of his budget-cutting program, and Greece's George Papandreou scraped through a confidence vote after swallowing EU bailout terms.
The summit, which took place on Thursday and Friday on Cannes' rain-swept seafront, marked the end of France's turn as head of the G20 bloc of major economies, and the start of Mexico's stint.
It was also, in symbolic turns, an embarrassment for Europe, with its leaders begging cap in hand for cash from China and other major emerging economies to fund elaborate bailout plans for the Mediterranean fringe.
Instead, the younger powers agreed to boost the size of the International Monetary Fund's war chest, raising the prospect that the Old Continent will find its budgets under scrutiny by officials from its former colonies.
And the final statement put no final size on even this promise of aid, kicking the decisions down the road to a future finance ministers' meeting.
Financial markets were unimpressed by Sarkozy's G20 swansong, closing down sharply Friday, and the Cannes debate did nothing to strengthen Italy, which saw its borrowing costs soar to a new and barely sustainable level.
"Put simply, the world faces challenges that put our economic recovery at risk," U.S. President Barack Obama said, reflecting concerns that Europe has failed to get to grips with its sovereign debt debacle.
Italian Prime Minister Silvio Berlusconi admitted that Italy had asked for the IMF to monitor his economic reforms, hoping to convince bond traders that his government is a safer bet than troubled neighbor Greece.
"The main problem we have, which has been clearly identified as much by the Italian authorities as by their partners, is a lack of credibility in the measures that have been announced," IMF chief Christine Lagarde warned.
In Athens, Prime Minister George Papandreou, who had been summoned to Cannes for a humiliating dressing down by Sarkozy and Germany's Chancellor Angela Merkel, narrowly won a vote of confidence.
Shortly before lawmakers began voting, Papandreou had announced he would see Greek President Carolos Papoulias later on Saturday to hand in his mandate and start talks on the formation of an emergency unity government.
Whatever the result, his eurozone partners had made it clear that either he or his successor would have to push through a bailout deal tied to tight fiscal controls decided last week in Brussels.
EU leaders warned that Greece would not get the next planned eight billion euro ($11 billion) aid installment from the IMF and EU unless the deal went through, and threatened to boot Athens out of the Union if it defaults.
Without these EU-IMF funds, Greece would run out of money within weeks.
The G20 leaders also pledged to ensure that the IMF has sufficient cash on hand to respond to the possible crisis and tasked finance ministers to come up with options for a eurozone "trust fund".
But they failed to pledge any precise sums, and observers said this marked a failure.
"It is fair to say the G20 summit with accompanying theatrics from Greece and Italy and the failure of the IMF and China to come to Europe's rescue has worsened the euro crisis," said Sony Kapoor of think-tank Re-Define.
The next G20 summit will be in Mexico in June 2012.