Leaders of G20 nations gathering Monday in Los Cabos, Mexico, get to go with Plan A after all.
Plan B, facing a Greek election result with anti-bailout parties poised to lead the country, could have left them dealing with an epic financial crisis and turned the summit into an exercise in real-time fiscal firefighting.
The results wouldn’t have been pretty, said James Haley, director of the global economy program with the Centre for International Governance Innovation, an independent think tank based in Waterloo, Ont.
“There was a not insignificant risk the whole summit would have been hijacked by a different outcome,” he said Sunday, after the Greek election result indicated pro-bailout parties will likely form the next government. “It’s not clear the Europeans would have been prepared to commit to anything, or that much would have been achieved on the policy level. It could have been potentially embarrassing.”
On the other hand, participants at G20 summits during the severe global downturn in 2008 and 2009 reached consensus on actions to stimulate growth and enact financial reforms.
That leaves the G20 leaders sticking to their original plan for Mexico: cramming two summits into one, said Mr. Haley.
The official summit will feature an ambitious agenda stacked with issues such as food security, structural reforms and changes to strengthen financial regulations. The “other” summit will be a heavy-handed attempt by the U.S., Canada and others to press European leaders to solve their mounting fiscal challenges and head off further contagion to their tepid economies.
Plan A may be a little less hectic than Plan B, but it might also be less successful.
The host country has been pushing to ensure the summit gives development issues high priority. But development groups, who have seen development agendas at the past two summits become overshadowed by economic events in Europe, are expecting more of the same.
Ultimately, the G20 should turn into a “global steering group” that can strike breakthrough deals on issues such as climate-change talks, trade and drugs, said Andres Rozenthal, senior fellow with the U.S. Brookings Institution in a recent blog.
That day may come, but for this summit, Mr. Haley believes European leaders will rebuff the push for a quick and decisive plan to calm markets and solve their crisis. Instead, he expects they will argue it is for them alone to solve together with other euro zone nations. Given their track record so far – and another election result Sunday that secured the parliamentary majority of the new anti-austerity Socialist government in France – that may not be encouraging. “What arguably needs to be done [in Europe] are larger, longer-term institutional arrangements that can’t be reached overnight,” Mr. Haley said.