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Greek Crisis Overshadows G20 Summit


French President Nicolas Sarkozy (left) and his U.S. counterpart Barack Obama arrive in Cannes for a bilateral meeting before the start of the G20 Summit of major world economies.
European Union leaders who are in Cannes, France, for a G20 summit are preparing for the possibility that Greece could leave the eurozone in order to preserve the 12-year-old single currency.

Amid those moves, reports from Athens indicated Greek Prime Minister George Papandreou was backing away from a plan for a referendum in Greece on the latest EU debt deal -- a plan that shocked European leaders and caused financial markets to slump when it was announced this week.

Meanwhile, China and Russia pressured EU countries at the G20 summit to solve their debt crisis, with Beijing offering a possible $100 billion in rescue funds if eurozone countries guarantee that their bailout plan will work.

Russia also offered possible financial aid on the sidelines of the summit. But President Dmitry Medvedev also scolded European governments, saying their action "need to be much more dynamic and decisive to bring about order."

The summit was meant to focus on proposed reforms to the global monetary system and steps to reduce speculation on capital markets -- such as a general Financial Transaction Tax.

But the latest developments on the Greek crisis -- including its impact on Europe's wider banking and sovereign debt crisis -- hang over the two-day gathering.

'No Surprise'

U.S. President Barack Obama arrived in Cannes on November 3 and immediately went into bilateral talks with French President Nicolas Sarkozy.

"I think it is no surprise that we spent most of our conversation focused on strengthening the global economic recovery so that we are creating jobs for our people and stabilizing the financial markets around the world," Obama said. "The most important aspect of our task over the next two days is to resolve the financial crisis here in Europe."

Obama also expressed U.S. concerns that Greece's decision to conduct a referendum on its 130 billion euro bailout plan could undo EU efforts to contain its debt crisis.

"Here at the G20, we are going to have to flesh out more of the details about how the plan [on the European financial crisis] will be fully and decisively implemented," he said. "And we also discussed the situation in Greece and how we can work to help resolve that situation as well."

Late on November 2, Sarkozy and German Chancellor Angela Merkel told Greece's Prime Minister George Papandreou that Greece would not receive any more aid until it votes to meet its commitments to the eurozone.

'Greece's Future In Europe'

Greece is due to receive 8 billion euros ($11 billion) in aid payments this month. But a condition of that aid -- along with a laboriously negotiated EU plan in which Greece's creditor banks would write off half of the debt owed to them by Athens -- is that Greece takes steps to bring its budget deficit within euro currency membership requirements.

To do so, the government in Athens must raise taxes and pass strict austerity measures that are deeply unpopular in Greece.

Sarkozy says neither Europeans nor the International Monetary Fund can envision paying out a sixth installment of aid to Greece unless Athens adopts the entire package of reforms required under the October 27 rescue deal.

"Fundamentally, it is clear that the question that is being posed is that of Greece's future in Europe," he said. "Does Greece want to stay in the eurozone or not? We hope it does, we sincerely hope it does, and we will do our utmost so that this is possible."

Merkel says she would prefer to stabilize the euro with Greece as a member. But Merkel said the top priority is to save the euro, not rescue the Greeks.

Meanwhile, the European Central Bank unexpectedly cut its interest rate from 1.5 percent to 1.25 percent on November 3 in an attempt to boost the weakening eurozone economy. The new president of the European Central Bank, Mario Draghi, said in Germany that the rate cut is aimed at preventing the eurozone from slipping into a recession amid prospects of weak economic growth.

written by Ron Synovitz, with agency reports
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