LOS CABOS, Mexico –- With the pro-bailout New Democracy party’s victory in Greece, leaders of the world’s biggest economies averted the worst of possible scenarios heading into their annual summit Monday.
The heads of the Group of 20 nations, who are gathering in a beachfront resort in Los Cabos, Mexico, were bracing for chaos to break out in financial markets and possibly their meetings if the Greek parliamentary election went the other way in favor of the radical anti-austerity group Syriza.
But the vote tally eased fears of an imminent Greek exit from the Eurozone. Asian markets, the first to react to Greece’s election results, opened sharply higher Monday. U.S. stock futures rose Sunday night.
“Certainly the outcome was among the most positive one could have expected,” said Domenico Lombardi, an expert on international monetary relations at the Brookings Institution. It essentially lifted the cloud of “an immediate meltdown and uncontrolled escalation of the Greek crisis.”
Even so, Lombardi and other analysts think the election results were likely to provide only temporary relief as they didn’t change the grim realities of Greece’s deep financial and economic problems. Nor did the Greek vote change the low expectations for the G-20 summit.
President Obama and other leaders, arriving here Sunday night, are hoping to avoid a repeat of last year’s G-20 summit in France when the meetings were overshadowed by crises in Greece and Italy, and leaders failed to secure funding from member countries to help contain the problem.
Since then, some of the G-20 nations have pledged to bolster the International Monetary Fund’s bailout resources by a total of about $430 billion. Major developing countries such as China are expected to specify their commitments at this summit.
But with the Eurozone crisis in its third year and dragging down growth around the world, European heads, especially Germany’s Angela Merkel, the main proponent for austerity, are expected to come under heavy pressure from Obama and other G-20 leaders to do more – and more quickly.
"This is a moment in which things are very, very bad ... and we have to give out a good signal between now and Tuesday," said Mexico’s President Felipe Calderon on the eve of the summit. But he also noted that he didn’t expect to reach specific agreements on Europe.
Calderon, the host of this year’s G-20 summit, is in the final months of his presidency and is keen to burnish his own legacy, amid widespread public dismay over drug-war violence that has claimed more than 50,000 lives since he took office December 2006. The summit is one of the events that he is hoping will put his administration in a favorable global spotlight.
Obama has even more at stake, as Europe’s economic woes have become a major stumbling block for the American economy – and his political future. The president has pushed his European counterparts, especially Merkel, to shift to more pro-growth policies, but he and other non-European leaders have little leverage beyond peer pressure.
Also at the summit, Obama is scheduled to have bilateral meetings Monday with Russia’s President Vladimir Putin. Relations between the two have stiffened because of differences over Syria. On Tuesday, Obama will meet with Chinese President Hu Jintao. U.S.-China trade tensions have increased recently.
Although the Eurozone crisis will dominate the discussions, the Los Cabos meeting has a wide-ranging agenda, including strengthening the financial system and enhancing food security and efforts to fight against climate change.
“Now that some of the fear [related to] the Greek elections has subsided, we’re hoping this makes room for the broader agenda that President Calderon expressed the need for yesterday,” said Adam Taylor, vice president for advocacy at World Vision, which along with other humanitarian organizations is pushing G-20 leaders to better address not just the European debt crisis but the crisis of global hunger and malnutrition.
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-- Don Lee in Los Cabos with Tracy Wilkinson in Mexico City
Photo: U.S. Ambassador Julian Ventura, left, and President Obama upon disembarking from Air Force One at the Los Cabos International Airport. Credit: Jewel Samad / AFP/Getty Images