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World leaders to Europe: Solve your own problems, then maybe IMF can help later
CANNES, France (AP) ' Europe failed to get the leaders of the world's wealthiest economies to help out with its debt troubles, but everyone left a G-20 summit Friday relieved that at least they forced the Greek prime minister not to hold the world hostage with a bailout vote.
It took a public berating of Greek Prime Minister George Papandreou, and Greece's politics are in upheaval as a result, but the shaky bailout plan appears back on track for now.
Investors had been hoping the Group of 20 nations would lend the struggling eurozone a helping hand ' but the G-20 leaders said Europe needs to help itself first. They said the International Monetary Fund could be beefed up to help more, but not for at least three more months.
The debt crisis that rocked the 17-nation currency union for the past two years has reached a new high and now threatens to push the world economy into a second recession.
Despite the political firepower at the summit ' which included the leaders of Europe, China, Russia, Brazil, India and the United States, among others ' meeting was overshadowed by political turmoil in Greece and worries about Italy, which accepted IMF supervision of its reform efforts.
The IMF move was an highly unusual intervention into the affairs of one of the world's leading economies.
Europe's own rescue efforts, cobbled together at several crisis meetings last week, left open many important questions, making cash-rich countries like China, Russia or Brazil reluctant to commit more than just words.
"It's important that the IMF sees its resources reinforced," Jose Manuel Barroso, the president of the European Commission, told reporters. However, any decisions on how to reinforce the IMF were left until February.
The lack of detail disappointed markets, with stocks, bonds and the euro falling. Italy's borrowing rates, in particular, hit worrying new highs.
With their own finances already stretched from bailing out Greece, Ireland and Portugal ' and traditional allies like the United States wrestling with their own problems ' eurozone countries were looking to the IMF to use its financial reserves and rescue experience to help prevent the debt crisis from spreading to its larger economies, such as Italy and Spain.
The most likely way the eurozone could still get additional financing is through a special account under the auspices of the IMF, into which individual countries could make payments. Those investments in turn could then be used to boost the currency union's own bailout fund, the euro440 billion ($606 billion) European Financial Stability Facility.
But German Chancellor Angela Merkel and IMF chief Christine Lagarde both said that at the two-day meeting not a single country made a firm commitment that it would participate.
The broader increase of the IMF's resources, which also remained vague, is designed to help countries around the world, not just the eurozone.
Barroso said several countries had indicated they would provide bilateral loans to the IMF ' which would give it more funds without collecting money from reluctant members like the U.S.
The G-20 final statement also said the IMF should somehow issue more special drawing rights, or SDRs, the fund's own reserve currency that can be exchanged for cash with central banks around the world. SDRs can just be created and do not require new commitments from IMF member states.
Finance ministers will now have to work out the details of these measures. French President Nicolas Sarkozy said the G-20 would next deal with the topic in February.
The lack of progress on the debt crisis troubled some countries that would be hard hit by another recession in the eurozone.
"Every day that the eurozone crisis continues, every day it isn't resolved, is a day that has a chilling effect on the rest of the world economy," said British Prime Minister David Cameron. "We are ready to do our part to help stabilize the world economy. ... But you can't ask the IMF or other countries to substitute for the action that needs to be taken within the eurozone itself."
The G-20 announcements show how dramatically the powers have shifted within the IMF.
Until two years ago, the IMF ' dominated by the traditional powers in Europe and the U.S. ' mostly applied its painful financial adjustment programs to poor and emerging economies in Asia, Latin America and Africa.
Now, it's growing powers like China, Brazil and South Africa that have to decide whether helping Europe is a worthy investment.
In an effort to do just that, Italy, the eurozone's third largest economy with a debt load of 120 percent of gross domestic product, asked the IMF for help monitoring promised budgetary and structural reforms on a quarterly basis.
The country's borrowing rates have risen sharply this week ' and jumped further on Friday ' on fears that Prime Minister Silvio Berlusconi does not have the political strength to implement the reforms.
Lagarde said the IMF hopes to start checking whether Italian measures promised to the eurozone are actually implemented by the end of November, to target "a lack of credibility."
Jamey Keaten, Joe McDonald, Angela Charlton, and Greg Keller contributed to this report.