It is easy to think that the French G20 was all about Greece all of the time. Certainly the media did their best to convey this impression, with journalists reacting to every new event (or rumour) from Athens. This impulse was especially noticeable on the first day of the summit, when most people at the media centre were watching the referendum-non-referendum saga, rather than what was happening at Cannes.
Although exaggerated in terms of what actually took place with respect to decision making at Cannes, the psychological impact of this stressful situation for leaders was palpable. Non-European leaders as well as European members of the G20 were constantly probed in public forums about their views on the meaning of the Greek crisis, not only for their own countries, but the entire summit project.
Looking at the G20 as a “club” of leaders, however, the Greek situation can be said to have some positive implications. Appreciating that the crisis is not just about Greece, but the wider euro-zone troubles, the entire cluster of G20 leaders — whether members of the G7, the BRICS or the cluster of countries in the middle — have regained their intensity regarding the need for the G20 club to work. The dominant language, as highlighted in President Obama’s press conference, underscored concerns about firewalls, buffers and the need for a sustainable path of economic development for Greece specially, and Europe more generally.
What differentiated the G20 at the leaders’ level at its inception was its sense of collective engagement with the financial crisis. As the world moved towards the possibility of a twenty-first century Great Depression, a very different and updated version of concert power emerged. In terms of both declaratory statements and tangible deliverables, the return of the G20 to its origins as a crisis committee explicitly emerges in a number of ways. Until a few months ago, leaders of non-EU countries avoided entanglement with the euro zone, saying that the Europeans should get their house in order. Now — worried about a dramatic contagion effect — there is a concerted focus by those same leaders to be involved. An illustrative example is the attitude of Australian Prime Minister Julia Gillard, whose press conference I attended. Instead of trying to avoid being entangled in the crisis, Gillard said she hoped that Greece would remain in the euro zone. Notwithstanding opposition criticism in Australia that this was type of initiative was a waste of money, she also promised some new funding for the IMF.
In terms of deliverables, the G20 is moving forward on a number of points. One is to put emphasis on IMF surveillance inside Europe itself, with the push to have Italy accept “voluntary” oversight of its austerity measures. Such a move is designed to create an effective instrument that allows these austerity measures to be implemented on a clear timetable without any slippage. The fact that the final declaration states that this surveillance will be carried out with public verification with respect to policy implementation on a quarterly basis illustrates the extent of the anxiety.
Another move — reinforced by David Cameron’s report on global governance — is to raise the institutional standing of the Financial Stability Board (FSB), with an enhanced legal personality and operational autonomy. As the Cameron report says, the FSB should be established “as an independent legal entity so that it has the identity, authority and capability required to play a fully effective coordination role at the international level.”
If there are unanticipated positives from the Greece/euro-zone crisis on the “club” dynamic for the G20, the loss has been the G20’s shift from a crisis committee to a steering committee, with a wider ambit over global economic governance. To a great extent, this negative outcome is a result of problematic French leadership. In style, the real deficiency was due to over promising by President Nicolas Sarkozy. Instead of concentrating on a manageable agenda, Sarkozy declared that progress could be garnered on a wide number of fronts — such as signalling that progress would be made on an ambitious anti-corruption program and an agreement to establish a financial transaction tax (FTT).
This overselling was not compensated by a sophisticated “ear to the ground” about what was possible (or not) in an environment of renewed stress regarding growth and jobs. The anti-corruption initiative had strong support from elements of the business community and civil society, but the French host could not extract any ambitious tangible outcomes. The FTT had a powerful champion in Bill Gates, but the Cannes G20 issued only ambiguous words with the statement that “We acknowledge the initiatives in some of our countries to tax the financial sector for various purposes, including a financial transaction tax, inter alia to support development.”
The immediate mood coming out of Cannes is one of relief: the G20 appears to have applied disciplines to a Europe that, amidst all its institutions and meetings, failed to get a watertight agreement on the euro crisis on its own. Reinforcing this feeling of relief was the fact that these disciplines were applied without exacerbating tensions between Europe, the United States, China and the rest of the BRICS on other issues.
In the longer term, however, the return to crisis committee will complicate the dynamics of the G20. In the press kit issued at the outset of the Cannes summit, the document “G20 France 2011” (misleadingly) gives credit to France and Europe in creating the G20 at the end of 2008. Instead of being a solution-oriented core of the summit, Europe has instead become the pivotal problem zone. The fallout in terms of Europe’s reputation will only be felt well after the relief of Cannes is a distant memory.