World leaders have expressed impatience and irritation with Europe’s inability to defeat its two-year financial crisis, urging the EU to quickly find a solution for the sake of the global economy.
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Meeting this week at a summit in Cannes, Group of 20 chiefs yesterday pushed European authorities to enact a week-old rescue plan that includes leveraging of the European Financial Stability Facility to 1 trillion euros and a 50% writedown on Greek debt meant to help the government avoid default.
Leaders from the U.S., Britain, China, and Russia have all expressed disappointment over Europe’s having missed the G-20’s deadline to deliver a plan this week to resolve the region’s fiscal woes. After hammering out a plan last week in Brussels, European leaders had hoped to present that plan this week, but on Monday, Greek Prime Minister George Papandreou announced plans to put Greece’s debt deal to a referendum, which threatened to unravel the largely Greece-centric resolution.
Though Papandreou yesterday repealed his call for a referendum, Athens will remain a focal point for policy makers and investors today as the prime minister faces a confidence vote in parliament. A no-confidence vote would trigger early elections, and could result in a large political upheaval.
Aside from Greece, European leaders have also been struggling to find funding for their enhanced rescue fund. It now looks as though Brazil, Russia, India, China, and South Africa — a group of emerging markets known as BRICS — will contribute to Europe, though in return they expect to gain more influence in International Monetary Fund.
German Chancellor Angela Merkel and French President Nicolas Sarkozy teamed up this week to urge Italian Prime Minister Silvio Berlusconi, who overseas the euro zone’s second-largest debt load after Greece, to move forward with his own budget cuts. The IMF may be tasked with monitoring Italy’s efforts.
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“For me, Europe is all about Italy right now,” said Jurrien Timmer, who co-manages Fidelity Investments’ Global Strategies Fund in Boston. “The real issue is contagion, and Italy seems to be the line in the sand. Italy is really too big to fail. It’s the third largest bond market in the world, and it needs to be ring-fenced.”