The Azerbaijan State News Agency

WORLD

G20 summit to focus on eurozone debt crisis

Baku, June 18 (AZERTAC). G20 summits, it seems, can make a real difference. One assessment of the second meeting put it like this: "An enormous success in stopping the drop in the global economy".

That was experts at the Brookings Institution, a Washington think tank, writing about the London G20 summit of April 2009.

Now that is not a universally shared view. In particular, there has been criticism of the role of fiscal stimulus - tax cuts and public spending.

But there certainly seemed to be a unity of purpose and a lot of joint action from the London summit, in the shape of stimulus measures and a hefty boost to the financial fire-fighting capacity of the International Monetary Fund (IMF).

There is a painfully clear line of division at this summit - the eurozone and the rest.

The eurozone financial crisis has been the festering wound threatening the health for the global economy for more than two years. The risk has intensified in the past few weeks. The immediate dangers have been the strain on Spanish government debt in the bond market and the political uncertainty in Greece. But there are plenty of other dangerous elements.

Ahead of the summit there have been many calls from other G20 leaders for their eurozone members to take decisive action to reduce the danger of the infection spreading.

While Europe is clearly the big danger, there are also problems elsewhere in the G20, starting with the two largest national economies - the United States and China.

There is no denying that the recent performance of the US economy has been better than Europe's. The US economy grew 0.5% in the first quarter of this year, compared with no growth in the eurozone, itself better than the contraction of the previous three months. But the US is distinctly anaemic. Job creation has lost momentum and there are good reasons to worry about economic prospects.

The US also has its own problems with fiscal policy and government finances. Spending cuts and tax increases are due to take effect next year, in a way that most economists think far too abrupt. Some call it a "fiscal cliff" that the US faces unless the administration and Congress can agree to postpone or moderate the measures.

The Congressional Budget Office has warned that if no action is taken, it could cause a recession. A downturn in the US would certainly be something for the rest of the G20 to worry about.

China's economy is slowing, partly due to the deterioration in its European export markets. The central bank has cut interest rates but there will be more decisions to take about how to respond.

 

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