G20 Summit Roundup
Traders Magazine Online News, November 7, 2011
As the leaders arrived for the G20 Summit in Cannes, France last Thursday, Nov. 3, discussions focused solely on Greece for the majority of the day. Greek president Papandreou had surprised the international community by announcing that a referendum would held so that the Greek citizens could vote on whether to accept the austerity package Greece would have to adopt in order to receive its sixth tranche of aid and the measures decided on at the Brussels Summit, Oct. 26-27, 2011.
A political move that could either backfire badly or gain the support of the people and therefore put the onus on the opposition parties to back the measures will hit a crescendo on Friday when a vote of confidence in Papandreou will be held.
A special meeting had convened the night before, where Papandreou met with French president Nicolas Sarkozy, German chancellor Angela Merkel, head of the IMF Christine Lagarde and ECB chairman Mario Draghi. At their press conference, Merkel and Sarkozy insisted that this new psychological element had thrown markets into a tailspin and they made it clear to Papandreou that the measures decided on in Brussels needed to be adhered to in order for Greece to stay in the European Union.
The referendum needed to be held as soon as possible with a date of either December 4th or 5th and that the Greek people needed to decide on whether or not Greece should stay in the EU. Germany and France were committed to seeing Greece stay but it was up to the people of Greece to decide if that was what they wanted. Keeping the euro currency would not be an option if Greece was to leave the EU.
On November 3, the leaders spent most of the day discussing the European situation but did find time to have talks on president Sarkozy's financial transaction tax priority. As anticipated, there was not much agreement on this issue as most countries that weathered the financial crisis and didn't need to bail out their banks were opposed to any sort of financial transaction tax.
Bill Gates presented his idea to the G20 leaders that a tax on financial transactions should be put towards development projects and the Europeans fully supported it. An insider at the later closed meeting commented that the Europeans admitted that in reality, they needed the money. Under the guise of aiding the poor, France reiterated its commitment to establishing, along with other countries, a tax on financial transactions. The U.K. has repeatedly said that it would not approve such a tax in its current form unless there was a global deal - which clearly did not happen.
The second day of the G20 Summit proved to be most important to the future of the global economy and the global capital markets. With the Greek crisis abated for the moment, talks shifted to Italy who voluntarily asked the International Monetary Fund (IMF) to assess and monitor its policy implementation quarterly. No country has previously asked for this type of monitoring which was decidedly absent from the situation in Greece. This should keep the situation in Italy under control and avert any escalation that was present in the Greek situation.