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Events in Greece overshadow G20 summit in France

November 3, 2011

It has been a busy day in Europe. News from Greece spread across the Mediterranean today, as G20 leaders meet in Cannes, France. While the Group of 20 is supposed to reflect the ideas of emerging powers – such as Brazil, Russia, India and China – beyond the scope of the Western-focused Group of 8, all eyes were fixed inwards on Europe. China offered $100 billion in aid if the Eurozone countries can guarantee its most recent financial bailout plan will work. Russian president Dmitry Medvedev called for more “dynamic and decisive” action in Europe. India’s Prime Minister Manmohan Singh said more has to be done to restore investor confidence.

As the G20 began today, Papandreou headed back to Athens ahead of a Friday vote of confidence that may decide his fate as leader of Greece. As he met with cabinet members this morning, rumors spread that he had resigned. A CNBC article originally entitled, “Papandreou to Resign; Greece to Form Coalition Government: Report,” now reads, “Papandreou Tells Cabinet He’s Staying.” Finance Minister Evangelos Venizelos and four other ministers have asked Papandreou to step down, saying in a prepared statement, “We must… implement without any delay the decision of October 26.” While Papandreou’s government teeters (see “Composition of Greek Parliament” graph), he has withdrawn his proposal for a referendum and according to the LA Times, agreed to a new unity government in which he would step down from his post of Prime Minister.

Yesterday, in preparation for the G20, Nicolas Sarkozy and Angela Merkel took the stage with grim resolution. As the Eurozone waits for Greece to respond to last week’s bailout proposal, the International Monetary Fund (IMF) is due to send Greece its sixth installment of bailout funds set under previous agreements by the end of the month. However, French President Sarkozy said in no uncertain terms, Greece will not get “one more cent” in aid until Greece accepts its new bailout package. Greek Prime Minister George Papandreou stated that a referendum is possible by December 4th but that apparently is now a moot point. Germany’s Merkel stressed, “If the Greeks say they do not want to stay in the euro, we will accept it, but we will not abandon the euro.” While some argue that Greece will not need new money until December, the tension between Greece and its larger Eurozone comrades is palpable. The following video highlights Sarkozy and Merkel’s remarks yesterday at the G20 summit.

On one hand, new ECB president Mario Draghi sought today to comfort investors by cutting interest rates on bonds by 25 points to 1.25%. Another key leader, Jean-Claude Juncker of Luxembourg, president of the Euro Group (Eurozone Financial Ministers) said plans were in place for a Greek exit from the euro. These plans would include a “firewall” to prevent contagion spreading to Spain and Italy. Oddly enough, the collapse of the Greek government may boost investor confidence providing that the incoming coalition swiftly acts to accept the October 26th aid package. All the while, economic prognosticators continue to offer up varying Greek default scenarios, adding to the sense of chaos pervading financial circles and the G20 summit at Cannes. While potentially disastrous, the Eurozone crisis has provided a global drama that is catching the eye of many Americans.

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