Time for G20 to act

Updated: 2012-06-18 11:44

(China Daily)

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It is urgent the G20 leaders, gathering for a two-day summit starting on Monday in Los Cabos, Mexico, deliver genuine leadership to buttress the fragile global recovery.

Some European leaders may still insist that the eurozone crisis is a European crisis that should be solved internally.

That is quite understandable given the unpleasant experience some Asian countries endured when the IMF became an external firefighter in the late 1990s.

But such worries do not justify rejection of international cooperation, especially when the need for it has rarely been greater.

There is currently no guarantee that the Greek election on Sunday will produce a working majority for its government to reach a new austerity deal to stay in the eurozone.

If not, there is little reason for the optimism that some people are pinning their hopes on that, because there has been time to prepare, Greece's departure from the euro will not be as much of a shock as the collapse of Lehman Brothers in 2008, which provoked a global financial crisis.

With their own summit planned for later in the month, European leaders certainly have a Herculean task to fill the unfortunately ignored governance gap between a complete monetary union and incomplete fiscal and political integration to share risk across the eurozone.

Nevertheless, given the increasing possibility that the evolving eurozone sovereign debt crisis, which, if left unchecked, could plunge the fragile global economy back into recession, G20 leaders have a legitimate interest in promoting a timely and effective resolution of the crisis in the eurozone.

In this era of accelerated globalization, countries' interests have become more interwoven and interdependent than ever, making it imperative for global leaders to make hard calculations about what is best for the world economy.

European leaders are surely obliged to do their most to prevent such contagions as unsustainable spikes in the bond market, further runs on the banks in Spain, Portugal and Italy, and social and political unrest beyond Greece.

Their procrastination, not to mention failure, to avoid a disruptive and disordered Greek exit will definitely impose a huge cost on the rest of the world economy already heavily depressed by new concerns about jobs in the United States and recent signs of slowing growth in key emerging economies.

Therefore, the rapid deterioration in eurozone growth prospects and the heightened risk of a European banking failure not only underscore the gravity of the situation but also demand urgent actions from European policymakers as well as G20 leaders.