‘Beware the Greeks!” has become an alarm cry for the G20. Last year’s G20 summit in Cannes, France, was engulfed by the collapse of Prime Minister George Papandreou’s government as it failed to deal with the political fallout of the debt crisis.
On Sunday, G20 leaders, including President Jacob Zuma, will gather for this year’s summit at Los Cabos, on the southern tip of the Baja California peninsula in Mexico.
The get-together takes place just one day after the Greek elections, where Greeks are widely expected to aggravate their country’s rolling crisis and perhaps precipitate its departure from the eurozone by voting for parties opposed to a tough European bailout plan.
That eruption would send another tsunami across the ocean to Los Cabos. But this time the G20 host, Mexico, is at least ready for it, although how much it can do about it remains to be seen.
“We thought we had a pretty safe, broad agenda with specific deliverables, with many countries being part of this. We were well prepared for the summit,” said Mexico’s Deputy Finance Minister, Gerardo Rodriguez, in his office in the colonial-era National Palace overlooking Zocalo square in Mexico City.
As it did with its hosting of the COP16 climate-change summit at Cancun in 2010, Mexico had been exemplary in the thoroughness, transparency and inclusiveness of its preparations for the Los Cabos summit, convening more than 80 meetings of the G20 ministers in various portfolios across a very broad agenda of topics, and also engaging an unprecedented variety of other groups – business, labour (partly at SA’s insistence), civil society, youth, academics and even non-G20 countries.
“Things were moving well. On the financial architecture track we were able to achieve a preliminary commitment by countries to put more money into the IMF,” said Rodriguez, referring to the recent promise by G20 and other countries to boost the International Monetary Fund’s reserves by $430 billion (R3.6 trillion).
The Mexicans had also consulted widely on the drafting of the Los Cabos Growth and Jobs Action Plan, with its proposals for economic stabilisation as the basis for growth and job creation. And also an assessment of how well or badly G20 countries had implemented their previous commitments.
Mexico also thoroughly canvassed proposals for tightening up international financial regulations to prevent future debt crises, mainly by strengthening the Financial Stability Board – a plan of financial inclusion to bring more poor people into the banking system that will also help create jobs, tackle rising food prices and provide greater food security.
“This gives the process legitimacy and credibility, and accountability,” Rodriguez said of all of Mexico’s preparations. “And now we have Europe… and we cannot ignore that,” he added, rather ruefully.
“The challenge for a successful summit has been raised substantially by current circumstances.”
Nonetheless, ever resourceful, the Mexicans have adjusted their strategy for the summit in three ways, Rodriguez said. “We’re giving much more emphasis, we’re strengthening the narrative, in favour of growth, not so much on the fiscal adjustment side, on the structural reform side… We all know we need to be growing more to address the challenge of job creation,” he said, reflecting the significant shift in global thinking since the last summit as citizens in one country after another reject harsh austerity measures imposed by their governments and by supra-national institutions like the EU.
Mexico’s second, ingenious, adaptation to help channel the expected Greek tsunami is to offer the Europeans the Los Cabos summit as a forum for advancing their own discussions on further financial and fiscal integration to cope with crises like Greece. The EU is having its own summit later this month.
Rodriguez said the third adjustment Mexico was making to the Los Cabos summit was to include the Spanish debt crisis on the agenda.
Mexican President Felipe Calderon has been sharply critical of the Europeans for failing to rescue the Greek economy right at the start of its crisis. But as economist Luis de la Calle points out, that would have also required giving Greece’s private creditors a “haircut” and that didn’t happen because most of them were German and French banks.
Berenice Diaz, Mexico’s G20 “sous-sherpa” (deputy to “Sherpa” Lourdes Aranda, who is doing the heavy lifting to get the leaders successfully up to the summit and down again in one piece), said that Mexico had in fact already urged the Europeans to co-ordinate their efforts beforehand so that Los Cabos did not become a “hostage” to the eurozone crisis.
It is nonetheless a risky, if unavoidable enterprise, to tie the summit to Europe’s fortunes. “Our hopes are that the G20 will do enough in Los Cabos to maintain some kind of credibility in the current storm,” said one SA official in the process. “This means it has to engage with the European crisis which threatens to engulf the world.
“My fear is that meeting, as we are, a day after the Greek elections, we will not rise to the occasion.”
For SA, as for everyone else in the world, channelling the European tsunami is the first priority. But even if Los Cabos manages that, will the focus on the crisis completely overshadow all of the other priorities of SA and other developing countries, including G20 plans to increase food security, decrease commodity price volatility and boost global investment in infrastructure in low income countries?
Gonzalo Conseco, chief of staff in Mexico’s foreign ministry, concedes that the European crisis will absorb much of the attention of the leaders at the summit. “But this process involves many other people; vice-ministers and sherpas have been working on the declaration… so even if Europe does become the main focus, it doesn’t mean the summit will be wrecked. It’s likely to have significant results.”