Though it was not officially included in the agenda, the euro-zone crisis was the hottest topic during the two-day Group of 20 (G20) Summit in Los Cabos, Mexico. China’s plan to contribute to the recapitalization of the International Monetary Fund (IMF) along with other emerging countries and the outcome of the Greek general election may have brought more hope for the issue, but it will take time to see how the crisis unfolds.
　　On the first day of the summit on June 18, China announced it would contribute $43 billion to the IMF as part of the IMF’s recapitalization plan. The plan is expected to ensure that the IMF is sufficiently capitalized to address the risks and challenges currently facing the world economy, including the European sovereign debt crisis. Along with China, 12 other countries including Russia, India and Brazil announced their pledges to IMF recapitalization, which will boost emergency funding for the institution to $456 billion.
　　When addressing the summit, Chinese President Hu Jintao said European sovereign debt is an issue of general concern. “We should continue to support in a constructive and cooperative way the efforts of European countries to resolve their debt issues and bring their economies back on the track of steady growth as soon as possible,” Hu said.
　　All in the same boat
　　“The European debt issue was not on the official agenda of the G20 Summit this year, but it was one of the issues that concerned the summit most, as one of the most glaring problems affecting the global economic situation,” said Jia Xiudong, a senior research fellow with the China Institute of International Studies.
　　Currently, the global economy is universally faced with a downside risk. Many of the G20 members are in economic stagnation. The prolonged euro-zone debt crisis, slowdowns in major developed nations and emerging economies, and high unemployment in parts of the world are all posing threats to the fragile recovery.
　　“If the euro-zone crisis cannot be addressed properly, it will certainly spill over to other countries and further drag down the global economy,” said Jia.
　　“The world economy has come to a critical juncture and the improvement of global economic governance is an arduous task. We should build on the achievements we have made and strive for new progress,” said President Hu in his speech at the summit.
　　China has been doing its part in addressing the current crisis. Along with its recent move of contributing to the IMF, Hu also said G20 members should be firmly committed to promoting steady recovery of the world economy.
　　“We should, in a spirit of unity and win-win cooperation, seriously study and jointly explore ways to address the systemic risks in the world economy, and strengthen the hard-won momentum of economic recovery,” Hu said.
　　Hu visited Denmark, which holds the rotating presidency of the EU in the first half of 2012, on his way to the G20 Summit to show China’s support for Europe’s efforts to tackle the ongoing crisis. While in Los Cabos, he held meetings with several other world leaders, including U.S. President Barack Obama, French President Francois Hollande and German Chancellor Angela Merkel.
　　During their talks, Merkel briefed Hu on the latest development of the European economic and financial situation and Europe’s responses. Hu said China supports the continent’s efforts to promote integration and maintain the stability of the euro.
　　A united, stable and prosperous Europe serves the interests of the world, including China, Hu said, while reaffirming Beijing’s confidence that Europe has the wisdom and ability to overcome difficulties and safeguard economic stability and growth.
　　China has offered assistance to Europe since the start of the euro-zone debt crisis, and it will continue to back the EU’s efforts to achieve economic recovery and stable growth, Hu said.
　　“China is making its contribution, but the fundamental resolution for the euro-zone crisis relies on Europe itself,” said Jia.
　　Li Xiangyang, Director of Institute of Asia-Pacific Studies at the Chinese Academy of Social Sciences, said, “The European debt crisis is rooted in the institutional arrangement of the euro zone—monetary integration lacks the support of financial integration. The un- balanced economic development of euro zone members is another major cause. Therefore, the problem should be resolved within the euro zone first.”
　　Li said the G20 should show confidence in the ability of EU authorities to handle the euro-zone crisis, instead of focusing on aid.“For the current euro-zone crisis, confidence is more important than gold,” said Li.
　　U.S. reluctance
　　Unlike emerging countries contributing to the recapitalization of IMF, the United States and Canada, two major non-European developed countries, are seemingly inactive in bailing out Europe.
　　Washington rejected the IMF recapitalization plan. Canadian Finance Minister Jim Flaherty insisted there should be no support for the euro zone until it sorts out its own problems.
　　“The United States sees Europe as both partners and competitors. On the one hand, the close economic link is the basis for their cooperation. On the other hand, the two sides are competing for the dominant role in the global economy. For a long time, the United States has worried that the euro might constitute a threat to the dollar’s preeminence. Thus Washington hopes for a weaker euro,” said Jia.
　　“In addition, 2012 is an election year in the United States. In consideration of votes, Obama would not spend money in helping Europe. Canada insists European countries are wealthy enough to save themselves,” Jia added.
　　On the sovereign debt issue, even the policies of the two major euro-zone countries—France and Germany—differ from each other. Germany insists that the debtstricken countries should implement a policy of fiscal austerity in order to cope with the debt crisis. French President Hollande, however, has claimed that the austerity approach downplays the importance of growth.
　　“The two major euro zone countries should strengthen coordination and work out an integrated plan in accordance with the overall interests of the euro zone. Only then can other countries offer more help,” said Jia.
　　The Greece factor
　　Just a day before the opening of the G20 Summit, a piece of good news for both the summit and the euro zone came from Greece. The country’s pro-bailout conservative New Democracy Party won the Greek general election, and stands a good chance of forming a new government to take over the heavy task of getting the country out of the debt crisis and deep recession.
　　However, observers are cautiously optimistic at the good news. Jia said, “The election result comes as a relief for the euro zone. It is certainly helpful for boosting market confidence, but it is only the first step. We should wait and see whether the party will be able to organize a pro-bailout cabinet.”
　　“The problem of Greece is not simply whether it will exit the euro zone or not,” said Feng Zhongping, Director of the Institute of European Studies at the China Institutes of Contemporary International Relations. “The victory for the New Democracy Party is only part of the story. The gaming between Greece and the EU as well as the IMF is just beginning. The New Democracy Party will be unwilling to accept entirely the austerity program put forward by the EU.”
　　The Greek economy might continue to shrink in the next decade, Feng warned.
　　Both Feng and Jia said that the prospective pro-euro government in Greece may prove too unstable in pushing further austerity at home to seek the next bailout installment, as well as weak in negotiating with international lenders for softer terms.
　　However, the two observers said, the attitude of Germany to Greece seems to have become more flexible after the New Democracy Party won the election.