G-20 leaders trying not to let Greece overwhelm agenda

CANNES, France -- Leaders of the world's major economies gathered grimly along the gloomy French Riviera Thursday, determined to put Greece's political tumult and Europe's financial trauma behind them so they can turn to a wealth of other problems.

Working beside a rain- and wind-swept Mediterranean Sea that served as a metaphor for their troubles, President Obama and counterparts from six continents sought to unite behind Europe's latest rescue plan while demanding more details and swift enactment.

To that end, European financial leaders were laboring separately to put meat on the bones of the agreement announced last week, which calls for a bolstered, $1.4 trillion rescue fund, new capital requirements for banks and a 50% writedown of Greece's debt to banks.

The G-20 leaders were expected to endorse the Europeans' plan and offer some type of assistance, possibly in the form of increased International Monetary Fund lending authority. The fund has about $380 billion to lend but may need more if the eurozone debt crisis grows deeper.

The leaders wanted to deal with more than Europe, however, by returning to the business that has dominated their summits in Washington, London, Pittsburgh, Toronto and Seoul since the fall of 2008: boosting and rebalancing economic growth, regulating financial institutions and reducing budget deficits. They are expected to endorse a strategy on growth and jobs that includes specific short-term actions by some countries.

"You really do see a coming together around growth," said Lael Brainard, Treasury under secretary for international affairs, with various countries planning new spending and aid to those hurt by the economic slowdown.

"Central to our discussions at the G-20 is how do we achieve greater global growth and put people back to work," Obama said after meeting with French President Nicolas Sarkozy and German Chancellor Angela Merkel. "That means we're going to have to resolve the situation here in Europe."

Luckily for Obama, the Greek drama began to resolve itself shortly after his arrival in a city known for film festivals. Greece Prime Minister George Papandreou told his parliament that he would drop plans to hold a referendum on the latest bailout plan if opposition leaders back the bailout package. He said rejection of the deal would have forced Greece out of the 17-member eurozone.

The Greek leader's about-face followed a dressing down from eurozone leaders Sarkozy and Merkel on Wednesday night, during which Papandreou was told no more money would flow to Greece unless it agreed to stay in the monetary union and abide by the bailout's terms.

His announcement Thursday sent European and U.S. stock markets higher, as did the European Central Bank's decision, under new leadership from Italian banker Mario Draghi, to cut interest rates by a quarter point.

Since its first emergency summit in Washington at the end of the Bush administration, the G-20 has had a soothing effect on world markets. The London summit in April 2009 helped ease the global financial crisis with pledges to stimulate economies and regulate banks. The Pittsburgh summit that fall established a framework for "strong, sustainable and balanced growth."

Since then, however, G-20 members have gone their separate ways. The U.S. continued to pursue pro-growth policies, while Germany, Great Britain and others emphasized austerity. China, which has relied on exports to boost its economy, will follow through with plans to boost domestic consumption, Brainard said.

The two-day summit here presented an opportunity for leaders to perform a sort of Cannes-can — proving they can act in concert during times of crisis, as they did in 2008-09.

"What would be a good result for this summit and for Russia is that G-20 leaders confirm their willingness to act together against a new phase of the economic crisis, by way of concrete actions and positive signals to the markets," said Russian President Dmitry Medvedev. "Each of us must contribute to the common pot and abide by previous commitments."

Russia, Brazil and Great Britain offered to contribute more to the IMF, though British Prime Minister David Cameron said the money should not be invested directly in a eurozone bailout fund for fear it might not be repaid.

"When the world is in crisis, it is right that you consider boosting the IMF," Cameron said. "No government ever lost money by lending money to the IMF that supports countries right around the world."

But Obama, beset with political troubles at home over the need to boost growth and bust the deficit almost simultaneously, came to Cannes determined to put the onus on Europe to solve its own problems. Administration officials have said the IMF is sufficiently financed.

"For Europe's comprehensive plan to succeed, Europe really has to be at the center of that," Brainard said. "The core of that needs to be European commitment and European resources."

"Our ability to contribute, our ability to lead, and our ability to influence the outcome of these sorts of issues is not tied necessarily to having the American taxpayer pay for every problem," said Mike Froman, deputy national security adviser for international economic affairs.

Instead, Obama and his economic team are offering advice, based on the ignominious experience of the United States, which ignited the global financial meltdown in 2007-08.

"We have a number of lessons to be learned that we have shared with the Europeans," said Ben Rhodes, deputy national security adviser for strategic communications. "These are all lessons that are relevant to the current crisis."