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G20 begins to grapple with crisis G20 summit: Leaders alarmed over eurozone crisis
(about 1 hour later)
World leaders are gathering in Mexico for a G20 summit which is expected to be dominated by concerns about the crisis in the eurozone. World leaders meeting at a G20 summit in Mexico have urged Europe to take all necessary measures to overcome the eurozone debt crisis.
The victory of a pro-bailout party in the Greek election did not give stock markets the expected boost. They voiced unease over what one top official described as "the single biggest risk for the world economy".
Spanish Prime Minister Mariano Rajoy told other European leaders: "I think what we are going to transmit is a message of confidence in the euro." But European Commission President Jose Manuel Barroso said "the challenges are not only European, they are global".
Interest rates on Spanish bonds hit fresh highs on Monday. Sunday's victory of a pro-bailout party in the Greek election did not give stock markets the expected boost.
BBC World Service economics correspondent Andrew Walker says that while Europe is clearly the big danger, there are also problems elsewhere in the G20, starting with the two largest national economies, the US and China. Antonis Samaras, the leader of the New Democracy party that narrowly won the poll, has now begun urgent talks to form a coalition.
The slowdown in India is something else for the G20 to fret about, our correspondent adds. Mr Samaras also reiterated that he would seek changes in the terms of a bailout agreement reached with the EU and IMF.
US President Barack Obama was due to meet Russian President Vladimir Putin and German Chancellor Angela Merkel on Monday in the resort of Los Cabos, which is hosting the summit. BBC World Service economics correspondent Andrew Walker says that while Europe is clearly the big danger, there are also problems elsewhere in the world's major advanced and emerging economies, starting with the two largest national economies, the US and China.
The slowdown in India is something else for the G20 to fret about at the Mexican resort of Los Cabos, our correspondent adds.
He also met Mexican President Felipe Calderon at the G20, and told him that the Greek election results meant that there was a "positive prospect" of the formation of a Greek government that would address its debt crisis with international help. A draft of the statement to be released on Tuesday is expected to call for a co-ordinated global plan for job creation and growth, the Associated Press news agency reports.
Chancellor Merkel said any new government in Greece would have to comply with the promises of the previous one. href="http://www.bbc.co.uk/news/world-middle-east-18499777" >US President Barack Obama and Russian President Vladimir Putin held talks on the sidelines of the summit, urging an immediate end to violence in Syria.
"Elections cannot call into question the commitments Greece made. We cannot compromise on the reform steps we agreed on," she said. In a joint statement following their first meeting since Mr Putin returned to the presidency, they said they shared a belief that Syrians should determine their own future.
The two countries have been at odds over how to resolve the crisis.
'No lessons''No lessons'
Canadian Prime Minister Stephen Harper called on eurozone leaders to make structural changes to solve the debt crisis. On Monday, many world leaders expressed alarm in Los Cabos at what they saw as a lack of progress in dealing with the eurozone crisis.
World Bank chief Robert Zoellick said: "We are waiting for Europe to tell us what it's going to do."
The mantra at this G20 summit may be that everyone needs to pull together to avoid a global slowdown, but there is plenty of veiled acrimony.The mantra at this G20 summit may be that everyone needs to pull together to avoid a global slowdown, but there is plenty of veiled acrimony.
For those outside the eurozone, the verdict is that the crisis there is alarming and its leaders need to do whatever it takes to end it. There is also some impatience and incredulity that such a rich continent seems so incapable of taking decisive action.For those outside the eurozone, the verdict is that the crisis there is alarming and its leaders need to do whatever it takes to end it. There is also some impatience and incredulity that such a rich continent seems so incapable of taking decisive action.
A touch defensively, the President of the European Commission Jose Manuel Barroso told a press conference he had not come to G20 to be given lessons.A touch defensively, the President of the European Commission Jose Manuel Barroso told a press conference he had not come to G20 to be given lessons.
President of the European Council Herman Van Rompuy added that while Europe might have internal weaknesses to correct, other countries had their own imbalances and unfulfilled promises.President of the European Council Herman Van Rompuy added that while Europe might have internal weaknesses to correct, other countries had their own imbalances and unfulfilled promises.
This was partly a nod to the new IMF bailout fund, agreed in principle in April: a global firewall in case the eurozone crisis began to spiral dangerously.This was partly a nod to the new IMF bailout fund, agreed in principle in April: a global firewall in case the eurozone crisis began to spiral dangerously.
Ahead of this G20 summit, Brazil, Russia, China and Mexico all pointedly failed to commit to their pledges and some of them hinted that Europe could hardly expect them to dig deep into their pockets without a quid pro quo: making good on promised reforms to allot them more voting rights at the IMF's top table.Ahead of this G20 summit, Brazil, Russia, China and Mexico all pointedly failed to commit to their pledges and some of them hinted that Europe could hardly expect them to dig deep into their pockets without a quid pro quo: making good on promised reforms to allot them more voting rights at the IMF's top table.
"What the European countries need to do and what we'll be looking to see are clear commitments that they are prepared to take all of the necessary actions... and to create the structural changes necessary to create a... financial union in Europe," he said. Meanwhile, Jose Angel Gurria, the Mexican head of the Organisation for Economic Co-operation and Development (OECD), said the crisis was "the single biggest risk for the world economy".
But European Commission President Jose Manuel Barroso mounted a strong defence of the EU's handling of the crisis so far. Pascal Lamy, the head of the World Trade Organization (WTO), warned about the danger of contagion from the eurozone crisis.
He said that global volatility and uncertainty was fuelling a trend towards protectionism, which was not only stalling free trade but starting to reverse it.
Canadian Prime Minister Stephen Harper called on eurozone leaders to make structural changes to solve the debt crisis.
But Mr Barroso mounted a strong defence of the EU's handling of the crisis so far.
"Frankly, we are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy," he told reporters."Frankly, we are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy," he told reporters.
He added that he expected G20 leaders to "speak very clearly in favour of the approach the EU is following".He added that he expected G20 leaders to "speak very clearly in favour of the approach the EU is following".
President Putin called for rules to allow protectionism for countries facing a financial crisis. 'Heresy'
Meanwhile, Russian President Vladimir Putin called for rules to allow protectionism for countries facing a financial crisis.
"It is time to stop pretending and come to an honest agreement on the acceptable level of protectionist measures that governments can take to protect jobs in times of global crisis," he said."It is time to stop pretending and come to an honest agreement on the acceptable level of protectionist measures that governments can take to protect jobs in times of global crisis," he said.
"This is particularly important for Russia as our country will join the WTO [World Trade Organisation] this year and we intend to take an active part in the discussions on the future rules for global trade." "This is particularly important for Russia as our country will join the WTO this year and we intend to take an active part in the discussions on the future rules for global trade."
BBC diplomatic correspondent Bridget Kendall said: "For a forum which has always loudly claimed that free trade is the engine of growth, that is little less than heretical."BBC diplomatic correspondent Bridget Kendall said: "For a forum which has always loudly claimed that free trade is the engine of growth, that is little less than heretical."
President Obama had earlier talked about the importance of avoiding protectionism, which is the process of making imports more expensive to protect domestic jobs. US President Barack Obama had earlier talked about the importance of avoiding protectionism, which is the process of making imports more expensive to protect domestic jobs.