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G20 seeks solution to debt crisis G20 seeks solution to debt crisis
(about 1 hour later)
   
The G20 leaders are set to continue their talks on Friday as they seek to find a sustainable solution to the eurozone debt crisis.The G20 leaders are set to continue their talks on Friday as they seek to find a sustainable solution to the eurozone debt crisis.
They are expected to discuss ways to increase the firepower of the International Monetary Fund (IMF).They are 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.The hope is that increased resources will help the IMF to support struggling eurozone economies, such as Greece.
There have also been calls for a "financial firewall" to protect vulnerable economies such as Italy.There have also been calls for a "financial firewall" to protect vulnerable economies such as Italy.
The 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".The 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".
Greek threatGreek threat
The second day of the G20 meeting will also see the Greek prime minister George Papandreou face a confidence vote in parliament.The second day of the G20 meeting will also see the Greek prime minister George Papandreou face a confidence vote in parliament.
The opposition as well as several government MPs have called for Mr Papandreou to quit after his decision on Monday to hold a national vote sparked a turmoil on financial markets and upset his German and French counterparts.The opposition as well as several government MPs have called for Mr Papandreou to quit after his decision on Monday to hold a national vote sparked a turmoil on financial markets and upset his German and French counterparts.
Some members from his own party, including the finance minister said that they were against the referendum.Some members from his own party, including the finance minister said that they were against the referendum.
On Thursday, the prime minister said he would scrap the move if the conservative opposition party voted to pass the bailout package in parliament.On Thursday, the prime minister said he would scrap the move if the conservative opposition party voted to pass the bailout package in parliament.
However, there are fears that he may lose the confidence vote and Greece may have to hold fresh elections, a move which may further delay the implementation of a Greek bailout package.However, there are fears that he may lose the confidence vote and Greece may have to hold fresh elections, a move 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.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.
Mixed messagesMixed messages
In other developments on the first day of the two-day G20 summit in Cannes: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
'Health and vigour' Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule. Glossary in full
  • 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
'Health and vigour' Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule. Glossary in full
Meanwhile UK Prime Minister David Cameron has called for "political will" to solve the current economic woes.Meanwhile UK Prime Minister David Cameron has called for "political will" to solve the current economic woes.
In a report to the summit, Mr Cameron said willingness to act in a united way was the way forward.In a report to the summit, Mr Cameron said willingness to act in a united way was the way forward.
"We have the machinery that we need already," he said."We have the machinery that we need already," he said.
"What we need above all is the most precious and intangible commodity - political will."What we need above all is the most precious and intangible commodity - political will.
"Political will to act together, and to build the consensus we need to confront squarely the problems before us so that we can return our economies to health and vigour.""Political will to act together, and to build the consensus we need to confront squarely the problems before us so that we can return our economies to health and vigour."
'Explosion of Europe''Explosion of Europe'
Mr Cameron's comments came amid increasing concerns about the breakup of the eurozone.Mr Cameron's comments came amid increasing concerns about the breakup of the eurozone.
This after German Chancellor Angela Merkel said that the Greek referendum on the bailout package was essentially a vote on whether it wanted to be a part of the group.This after German Chancellor Angela Merkel said that the Greek referendum on the bailout package was essentially a vote on whether it wanted to be a part of the group.
She said the stability of the eurozone was more important than Greece's continued membership of it.She said the stability of the eurozone was more important than Greece's continued membership of it.
There are fears that if Greece decides to leave the eurozone, other economies may follow, a move that is likely to have huge implications for the region.There are fears that if Greece decides to leave the eurozone, other economies may follow, a move that is likely to have huge implications for the region.
French President, Nicolas Sarkozy warned that "we cannot accept the explosion of the euro, which would be the explosion of Europe".French President, Nicolas Sarkozy warned that "we cannot accept the explosion of the euro, which would be the explosion of Europe".
This is the first time that the French and German leaders, and Mr Papandreou himself, have openly talked for the first time of the possibility of Greece leaving the euro if it is unable to ratify the bailout package.This is the first time that the French and German leaders, and Mr Papandreou himself, have openly talked for the first time of the possibility of Greece leaving the euro if it is unable to ratify the bailout package.
'Italy holds the key'
The uncertainty created by the developments in Greece has fanned fears of its impact on eurozone's other vulnerable economies such as Italy and Spain.
The biggest fears have been about Italy, whose debt levels are substantially higher than that of Greece.
It has already resulted in a surge in Italy's borrowing costs. It is now having to pay 5.1% on one-year loans, the highest rate since joining the euro compared with the 0.3% interest paid by Germany.
The Italian government has also been facing increasing pressure from the eurozone leaders to implement austerity measures and reforms in a bid to reduce its debt levels.
The fears were fanned further after six former allies of Silvio Berlusconi wrote an open letter on Thursday, urging him to quit after his government failed to agree urgent 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 - one that Mr Berlusconi may be at risk of losing.
"Italy holds the key to the eurozone debt crisis," said Luigi Speranza of BNP Paribas.
"Developments in Italy are a crucial test for the credibility of the anti-crisis framework set by the European Union."