The G20 summit here has suddenly acquired a new meaning with Greece staging an unexpected coup in the past couple of days, hijacking the heads of government of 20 developed and emerging economies to sort out a very local and dirty financial mess of its own making. That, rather than the world’s long-term economic fundamentals, seems to hold all the attention now.

For the record, Greece is not a member of G20, but right now the G in G20 is all about Greece.

The crisis of governance in the once-upon-a-time global civilisation with a capital G has eclipsed the summit. The drama now squarely rests on how Greece, and eventually Europe, resolves the emergent debt crisis.

With speculation swe­eping across the continent on Greece’s future political course, European leaders got busy looking out for fire tenders and clutching every straw in the wind to save their Union from a collapse, even as the global financial market came under threat, in turn, injecting more uncertainty into a volatile equation.

Opinion makers, of whom there is no shortage at this point of time on the beaches of the Cote d’ Azur, say the crisis is already threatening to drag a heavily indebted Italy into a debt crisis and the European Union (EU) may be powerless to reverse that situation.

Caught in this high drama, prime minister Manmohan Singh, who came to Cannes with very good intentions, had to grin and bear the postponement of his 40-minute tête-à-tête with president Nicolas Sarkozy on Thursday. He nevertheless brought a voice of sanity, articulating that Europe resolve its issues without provoking a global bloodbath. He also advised European leaders to heed the voice of reason.

Singh said the euro zone countries had the principal responsibility of dealing with these problems and the dangers from a spillover from the euro zone were a matter of concern to the rest of the world.

Devoid of sugar coating, this probably means that the European Central Bank (ECB) should first pour funds to save Greece and the Union. International help, whether by way of dole from China, or from others in the international community should be tapped next. Such a view has many takers among both European and non-European pundits, and may be gaining currency by the time thee summit wraps up.

The prime minister used diplomatese to reiterate that India supported an intervention by the International Monetary Fund (IMF), but he made that gesture of support subject to several ifs and buts. “We strongly support IMF playing its part in restoring stability in Europe. At the same time the IMF must also keep in mind the liquidity requirements of developing countries which are not at the centre of the crisis, but may nevertheless be adversely affected as innocent bystanders,” Singh said.

There is good reason for such doublespeak. Unlike China, India lacks the financial wherewithal to single-handedly bail out Europe. It’s own development needs, riding the crest of growth, are huge. Some estimates, endorsed by the likes of former British premier Gordon Brown, suggest Europe needs at least $2.74 trillion in bailout cash to put its finances firmly back on track, but IMF has free investible resources of only about $250 billion, which it must spend wisely and not fritter away on a spendthrift countries like Greece.

Explaining the prime minister’s position, his sherpa at G20 and Planning Commission boss Montek Singh Ahluwalia said at a media briefing that resolving problems of lack of solvency required the country in question to be responsible for good housekeeping. For Greece, and by extension for the whole of Europe, they must first put their financial house in order. Referring to his personal pre-summit engagements, Ahluwalia said, “I have said it is the job of IMF to do surveillance of the euro zone and help identify and solve the problem.”

What this means is that IMF can only lend when a country comes to it and says, “I have a problem, and I have done all this to be solvent.” To be able to do that, the country in question would have to first open its finances to IMF’s scrutiny.

Asked if IMF could be an option of first resort, Ahluwalia said that while it had been implicitly agreed that IMF would lend to individual countries, whether or not they were members of a currency union, and an IMF bailout package could be put in place within a fortnight, there was an attendant need for countries to respect fiscal discipline.

He said the euro zone had introduced common currency without common fiscal discipline. “It was important to put in place a system to put Greece back in place,” he said.

Pundits on the periphery of the summit have suggested that on the basis of a timetable for fundamental reform — and a guarantee of joint responsibility — EU leaders could have asked ECB for a bridge loan to tide over the immediate crisis, or they could have borrowed from China or the oil states with or without IMF as an intermediary. They have also suggested that the rest of the world was being asked for help simply because not enough euro zone countries were willing take the ultimate responsibility for their own problems.

Echoing such sentiments, the prime minister said that “as G20 battled with short- term problems of crisis management, it must not lose sight of the development needs of developing economies. After a long period these economies experienced broadbased acceleration of growth, making them potentially significant contributors to global growth.”

This, he said, was now threatened by a slowing trend in growth in developed countries and uncertainties in financial markets.

shubhrangshuroy

@mydigitalfc.com