The gathering of G20 leaders in glitzy Cannes will turn out to be an affair to remember,
for all the wrong reasons. If there’s a red carpet, it’ll probably be borrowed and will symbolise the state of many nations’ finances. The main topic of the meeting will be the escalating drama in
the eurozone. Here’s a list of what will likely be the most keenly-watched plotlines of the two-day summit. It is not exhaustive.
Greece
George Papandreou scored a (personal) victory overnight by getting cabinet support for a referendum on the EU bailout plan. The referendum is now a very real prospect awaiting parliamentary approval, and one that fills other euro-leaders, and investors, with horror. If the Greeks vote “no”, the EU’s giddy €1 trillion rescue plan for the eurozone is sunk. The Greeks will likely default and abandon the euro. Everything unravels from there.
Anyway, there’s a huge headache over the timeline. A referendum would be in January, possibly December. The markets would implode between now and then.
Also last night, the chiefs of the Greek army, navy and air force were replaced by other senior officers, provoking an outcry from the opposition.
One of the sideshows in Cannes will be Papandreou being hauled up, like a naughty schoolboy, to speak to Angela Merkel and Nicolas Sarkozy.
Italy
Investors are nervous about Rome’s ability to finance its debts, even as Silvio Berlusconi’s government looks shakier by the day. Even before the Greek bombshell, yields on Italian bonds had been rising north of 6 percent, the danger zone. Berlusconi has called an emergency cabinet meeting for this evening. The PM needs to produce an economic reform package that won’t have his G20 peers falling over themselves laughing. Does this sound familiar? We went through the same rigmarole last week.
France
The game’s truly up if the credit crisis hits France and the nation loses its AAA debt rating. The gap between French and German bond yields has been blowing out: investors see France as increasingly risky compared with Germany. The entire euro-aid plan is predicated on the assumption that the nations with better credit standing can bail out those that are weaker. Take away France’s AAA and the rug is pulled out from under everything. And Nicolas Sarkozy will definitely not want his country to lose its top-notch rating several months before the presidential elections.
US
Suffering from diminished political clout back home, and with the US facing economic problems of its own, Barack Obama may not be able to do more than urge the eurozone to sort itself out sharpish, which he has already done several times.
China
Two days ago, Beijing had to consider whether it wanted to pump money into a vaguely-defined eurozone bailout package. Now, it’s not sure whether there will be a bailout package at all. Not surprisingly, Hu Jintao and other Chinese helmsmen are circumspect, and the Xinhua news agency this morning reveals as much. China is facing growth bumps of its own: its October PMI fell unexpectedly.
Protestors
Thousands of extra police have been deployed along the Cote d’Azur. The fear is that crowds of anti-capitalist protestors turn the affair into more of a riot than it already is.
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