Monday, Nov 05, 2012
MEXICO CITY - G20 finance chiefs held talks Sunday to tackle Europe's relentless debt saga amid new concerns about Greece, while the United States faced questions about its own fiscal dilemma.
Finance ministers and central bank governors from the Group of 20 top economies began two days of talks in Mexico City focused on easing fears over threats to global growth.
The eurozone debt crisis remains at the core of global worries as debt-riddled Greece faces another key deadline to avoid bankruptcy this month, while Spain is under pressure to seek its own bailout.
A Spanish source said Economy Minister Luis de Guindos, a guest at the G20 talks, will outline the country's banking and labour reforms but will not dwell on why the country is not seeking a sovereign bailout.
The United States is also in the spotlight over a looming "fiscal cliff" of spending cuts and tax hikes that could undercut the US economy and global growth.
The White House and Congress need to reach a compromise by the end of the year to avoid the cliff, but a resolution will have to wait until after Tuesday's presidential election, with US President Barack Obama and Republican Mitt Romney locked in a tight race.
"The G20 meeting takes place in an environment of concern over several issues in various parts of the world," Mexican Finance Minister Jose Antonio Meade told a news conference before a private dinner with his counterparts.
"There is concern over how the so-called fiscal cliff will be resolved in the United States," said Meade, whose country will hand over the G20 presidency to Russia on December 1.
"There is a perception that a fiscal adjustment of this magnitude is more than what is required to ensure that the United States returns to a sustainable path," he said, adding that US officials have voiced confidence that a compromise will be reached.
A European central banker, who requested anonymity, said the US fiscal cliff is one of "several risks" to the global economic outlook along with Japan's own budgetary challenge and slowing growth in China.
"Europe is among many factors. I wouldn't expect this to be only a euro area session," the European official told AFP.
The Mexico City talks are not expected to yield major decisions.
Two key figures in world finance, US Treasury Secretary Timothy Geithner and European Central Bank Mario Draghi, are represented by deputies, while China is focused on its Communist Party congress this week.
Since the G20 summit in June, the IMF slashed its 2012 global growth forecast to 3.3 per cent, eurozone unemployment rose to a record 11.6 per cent in September, and growth decelerated in emerging nations.
While the eurozone has moved closer to a banking union and activated a new crisis firewall, the problems in Greece have come back to haunt the single currency, more than two years after Athens received its first massive rescue.
Greek Prime Minister Antonis Samaras warned Sunday that Athens could be forced out of the euro if parliament fails to approve a new round of austerity measures needed for a lifeline from creditors this week.
"We must save the country from catastrophe... if we fail to stay in the euro nothing will make sense," he said.
Greece has been negotiating with the European Union, the International Monetary Fund and the European Central Bank to unlock a 31.5 billion euro tranche of a bailout package or risk bankruptcy in mid-November.
But the IMF said last week that the talks were stalled over the conditions for financing Greece, which has been seeking a two-year extension to meet its fiscal goals, sending stocks crashing.
A senior US Treasury official said Friday that it was "extremely important" for Europe to support Greece and help it "stay on the path of sustainability" as it undertakes tough reforms.