The G20 summit is not the stage-managed glory-fest the hosting French president was hoping for
IT WAS to be a crowning triumph for Nicolas Sarkozy. When preparations for the Cannes summit began more than a year ago, the set-piece event was expected to put the seal on France’s ambitious G20 agenda and set its president up for re-election early next year.
Even as the prospects of fulfilling some of France’s grander aims – reforming global economic governance or resolving a perennial row over China’s currency – receded in recent weeks, Paris billed Cannes as the occasion where European leaders would finally present world powers with their comprehensive solution to the euro crisis. That would allow the summit to project unity and resolve in efforts to stave off a new recession.
Instead, France’s plans are in disarray. Greece’s announcement of a referendum on its bailout deal, the abrupt U-turn yesterday, and the frantic efforts in between to contain the damage caused by a new wave of consternation in the markets, have wrought havoc with the agenda.
Gone was the tentative optimism of last week in Brussels; suddenly, Europe looked as vulnerable as ever. As the rain hammered down on the Palais des Congrès yesterday, months of carefully planned choreography now counted for nothing. Meetings over-ran, bilaterals were cancelled, and press conferences postponed at the last minute. When the first plenary session began at lunchtime yesterday, it almost felt like a sideshow after the drama of the previous 24 hours.
The spectre of a possible hard Greek default and euro exit hangs over the G20 summit, highlighting Europe’s frailty and divisions just when Sarkozy had hoped to showcase his leadership of the world’s major economies. On the eve of the summit, as France’s cost of borrowing rose to its highest level compared to Germany, the French president broke a taboo by admitting the single currency area could yet lose a member state.
The delegations will be keen to produce a final communique that addresses some of the big themes on the French agenda, but the chances of major breakthroughs are slim. Few expect progress on attempts to address volatility in global food prices, for example, while the chances of meaningful reform of the international monetary system – notably by getting China to raise the yuan’s value to reduce trade imbalances – look similarly remote.
France still hopes to make progress on a financial transaction tax.
Washington and London remain opposed, but may be amenable to certain EU states going it alone, with the proceeds of the tax possibly being used to fund development projects in poor states.
Behind-the-scenes efforts in recent weeks have focused on agreeing a package of measures, country by country, to relaunch global economic activity, and the final statement is expected to set out broad policy principles that would help prevent the global economy tipping into a new recession.
The agenda may have been pared back, then, but Cannes may nonetheless be remembered for one thing: since the last G20 summit took place in South Korea, a subtle but unmistakable shift in the balance of power has taken place – symbolised by Sarkozy’s call to Beijing last week to ask for Chinese help in boosting the firepower of the euro zone’s bailout fund.
Europe’s need for China’s surplus underlines how stagnant growth and huge debts have left the rich world economically dependent on emerging states and with even less leverage than before to pressure Beijing over its yuan policy. “We cannot go it alone,” French former prime minister Jean-Pierre Raffarin said this week. “China has taken over the baton and become banker to the world. That’s the new deal of the 21st century.”