Group of 20 nations all have a responsibility to help tackle the financial crisis in the euro area because the turmoil increases risks to the world economy, two German government officials said.
Countries outside Europe can help counter the crisis by making good on pledges to boost the International Monetary Fund’s financial firewall, the officials said in Berlin today, commenting on condition of anonymity because the talks have yet to take place. Germany will also call attention to the U.S. budget deficit, China’s exchange rate and Japan’s debt when G-20 leaders meet in Mexico, they said.
The comments signal possible conflict at the June 18-19 talks as German Chancellor Angela Merkel defends her austerity-led response to the debt crisis and seeks to limit the focus on Europe after Spain became the fourth euro-area nation to seek a bailout. Germany will reject any attempt at the summit to introduce growth measures fueled by debt, one of the officials said.
“Simply borrowing” is not the answer to solving the debt crisis in the 17-nation euro region, Merkel said in a speech in Berlin today.
G-20 leaders will meet at Los Cabos, Mexico, as perceived risks rippling from the euro area rise and indicators start to suggest the world economy is slowing, one German official said. All countries must do their part to strengthen the economy, he said.
Greece’s possible exit from the currency union is hanging over the summit as Greeks go to the polls on June 17. Merkel will be traveling to Mexico when the first results come in and European finance ministers will issue a statement on the election result at the G-20 if needed, the German officials said.
“The question whether Greece implements its program, the question whether obligations will be kept at all in the future” have an impact that goes beyond Greece, Merkel said in her speech. All European Union countries, not just Greece, must stick to their obligations for economic overhauls to show the euro region can solve its problems, she said.
Fighting the debt crisis is a long process and the rest of the G-20 can and should help by ensuring they bulk up the IMF’s crisis backstop as agreed in April, one German official said.
G-20 countries agreed during the lender’s spring meetings to more than double its war chest with $430 billion in pledges. European governments committed $200 billion of the new funds.
Merkel’s message to her G-20 peers will be similar to the one she delivered at the Group of Eight summit in Camp David, Maryland, in May, according to the officials. Germany will resist any pressure for further stimulus spending and views both budget austerity and growth-spurring measures as solutions to the debt crisis, the officials said.