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Summary Worlds top economic powers leaders has put Italy under watch, but no new aid approved for eurozone.
Leaders of the world’s top economic powers pushed Europe into acting to stop Italy following Greece into a debt crisis, but failed to come up with new funds to boost the IMF war chest.While the G20 summit agreed in principle to increase IMF funding, the leaders did not settle on any precise figure or timetable, kicking the issue down the road. Financial markets were unimpressed.The risk premium on Italian bonds shot up to a new record and eurozone stock markets tumbled, with Londons FTSE-100 index closing down 0.33 percent, Paris CAC-40 down by 2.25 percent and the Frankfurt DAX by 2.72.Nor was there any let-up in pressure on debt-laden Greece, whose ongoing political and economic crisis still hung heavily over Cannes rain-lashed seafront summit venue, as an example of the threat facing Italy.“Put simply, the world faces challenges that put our economic recovery at risk,” said US President Barack Obama, reflecting concerns Europe has failed to get to grips with its sovereign debt debacle. “With respect to Europe, we came to Cannes to discuss with our European friends how they will move forward and build upon the plan they agreed to last week to resolve this crisis.”Summit host President Nicolas Sarkozy of France put a determined face on to defend his year-long tenure as G20 chairman, and won warm words from Obama in an unprecedented joint television interview. But critics were quick to point out that concrete progress on financial reform and costed promises of bail-out money were nowhere to be seen.Amid pressure from the United States and major emerging nations, Italy accepted a humiliating deal to put its economy under international surveillance in a bid to restore market confidence. Investors are jittery that Italy, also heavily indebted and with sluggish growth, could follow Greece and have sent Romes borrowing costs to unsustainable levels in recent days.Italian Prime Minister Silvio Berlusconi confirmed Italy had asked for the International Monetary Fund to monitor its economic reforms, but said that he had turned down an offer of financial aid as it wasnt necessary.Rome has recently adopted two austerity packages and has promised more measures, but markets have remained sceptical that they will succeed in eliminating the deficit by 2013 and boosting growth. The main problem we have, which has been clearly identified as much by the Italian authorities as by their partners, is a lack of credibility in the measures that have been announced, IMF managing director Christine Lagarde said.European Commission chief Manuel Barroso hailed the move as important, not only for the euro area but for global stability and Germanys Chancellor Angela Merkel said: We are very happy with results here.A team from the Commission, which will also step up its monitoring of Italy, will travel to Rome next week, Barroso added.
