G20 looks at plan to boost growth

Jose Manuel Barroso: ”We are fully committed to support Greece as part of our European family”

G20 leaders in Cannes are considering an action plan to boost growth and rebalance the global economy.

The plan, a draft of which has been seen by the Reuters news agency, includes China moving “more rapidly” towards flexible exchange rates.

The US will agree to start reducing its debt as a proportion of GDP by 2015.

Also at the summit, EU Commission President Jose Manuel Barroso said that Italy had asked the IMF to monitor the implementation of its economic reforms.

The reforms will be based on the package that was outlined by Italian Prime Minister Silvio Berlusconi in a letter to EU leaders last week.

Greek problems

The leaders are also expected to discuss ways to increase the firepower of the International Monetary Fund (IMF).

The hope is that increased resources will help the IMF to support struggling eurozone economies, such as Greece.

Mr Barroso said that he hoped Greece would stay in the euro, but added that the country would need to take on the responsibilities that come with membership.

Greek prime minister George Papandreou will face a confidence vote in parliament on Friday.

Opposition politicians and some members of his government have called for his resignation, following his announcement of a referendum on the austerity measures.

The finance minister said on Friday that the referendum has now been scrapped, but the announcement of the referendum caused big market falls earlier in the week.

US President Barack Obama said on Thursday that resolving the eurozone debt crisis was “the most important aspect of our task over the next two days”.

If Mr Papandreou loses the confidence vote then Greece will have to hold fresh elections, which may further delay the implementation of a Greek bailout package.

Eurozone leaders have already withheld 8bn euros ($11bn; £7bn) of fresh rescue loans to Greece and there are fears that further delays may see the government run out of cash and default on its payments.

Italian reforms

Italy’s decision to call in the IMF to make sure it implements austerity measures is a response to the increasing pressure from eurozone leaders to reduce its debt levels.

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On Thursday, six former allies of Silvio Berlusconi wrote an open letter urging him to resign after his government failed to agree economic reforms.

The Italian cabinet agreed a limited package of budget reforms at an emergency meeting on Wednesday evening, but they failed to agree to issue a decree implementing the changes, meaning that they must now go to a confidence vote in parliament.

“Developments in Italy are a crucial test for the credibility of the anti-crisis framework set by the European Union,” said Luigi Speranza of BNP Paribas.

In other developments on the first day of the two-day G20 summit in Cannes:

• President Obama warned that the eurozone financial crisis threatened to engulf the world
• Italy is to commit to further cuts to its debts and its annual borrowing rate according to a draft communique
• China indicated that it would not consider providing money to the eurozone bailout fund until the situation in Greece has been resolved
• Chinese President Hu Jintao also played down the chance of allowing the value of the yuan to rise, contradicting more optimistic remarks by the US
• India and Canada expressed their opposition to the idea of a tax on financial transactions, something strongly backed by eurozone governments
• the G20 agreed to look at the credit default swaps markets, which has been blamed by some European leaders for exacerbating the eurozone debt crisis

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