G20 Summit: EU Shift on Greek Euro Membership

The EU officials announced that it was unthinkable for Greece to quit the euro because it would be, Sarkozy has said, “a failure of Europe.”

President Barack Obama heads to the city of Cannes to discuss on Europe's financial rescue plan of fixation the long-running crisis that could send the already-weak U.S. economy into another recession. Photo: France Diplomatie/Flickr

Frech President also announced that Europe had “done everything we could” to keep Greece in the eurozone and “now it is up to them to decide if they want to stay in the euro with us.”

These words were prompted by the surprising decision of Greek Prime Minister, George Papandreou, to call a controversial referendum on his country’s $130 billion European bailout plan in early December. It caught European leaders completely off guard and scrambling for a response.

Papandreou’s announcement that he would stage a referendum alarmed world financial markets and threw into question an ambitious and costly European deal worked out in torturous negotiations a week ago.

Merkel and Sarkozy called Papandreou to Cannes for talks at which European leaders expressed their anger and forced him to hold the referendum as soon as possible.

The results of the summit, if “no” vote won, could have consequences as for Greece and for the rest of Europe. It could possibly lead to a Greek default, chuck Greece out of the 17-nation eurozone, collapse many European banks and send the global economy spinning back into recession.

The leader of the world’s largest economy, Barack Obama, may have limited influence on a two-day Group of 20 summit in France.

President Barack Obama heads to the city of Cannes to discuss on Europe’s financial rescue plan of fixation the long-running crisis that could send the already-weak U.S. economy into another recession.

The White House is sure that Europe can solve the crisis problem on its own. It is also worried the Greek decision to hold a referendum over its 130 billion euro ($178 billion) bailout will unravel EU efforts to contain its sovereign debt crisis.

“U.S. leadership, which in the past might have been helpful in sort of pulling the Europeans together, has eroded,” said Sebastian Mallaby, a fellow at the Council on Foreign Relations in Washington. “You’ve got a world where the natural postwar leader has kind of got its hands tied behind its back, and the world ain’t doing too well as a result.”

The president has to act carefully, given the United States is struggling to fix its own fiscal problems and has limited means to intervene in Europe even if it wanted to.

“We’ll see if the president decides to grab this mantle and really drive the G20 discussion,” said Heather Conley at the Center for Strategic and International Studies in Washington.

“European leaders and particularly European finance ministers have not been fully appreciative of U.S. advice and counsel on how to deal with the European crisis because of U.S. domestic challenges,” she added.

The EU officials said a $11 billion loan will help Greece to avoid bankruptcy.

Sarkozy hopes the summit is Europe’s chance to assure the rest of the world that a comprehensive plan to deal with its debt crisis had finally been reached after nearly two years of half-measures and procrastination.

French President will also welcome Hu Jintao of China, the leaders of India, Brazil, Russia and the other members of the Group of 20 leading world economies in the city of annual film festival, but the event is different: the French leader hoped to make six months before he faces a tough re-election vote. [Via Boston and Reuters]

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