On Thursday, international leaders will get together at the G20 summit in Cannes, France, to consider solutions to the economic turmoil plaguing the globe. Taking center stage will be the issue of the sovereign debt crisis in the European Union.
The international community applauded the news last week that EU countries had agreed on a bailout package to help troubled Greece out of its sovereign crisis. But this week, Greek Prime Minister George Papandreou decided that the country will hold a referendum on whether the country will agree to the package, introducing further uncertainty into the euro zone's already shaky outlook.
G20 countries will have a full docket of complicated issues to discuss, but these are the key stories to watch for this Thursday and Friday.
Calming Greek Turmoil
George Papandreou is to take part in emergency talks with IMF Managing Director Christine Lagarde and other European leaders, in advance of the G20 summit. President Obama, German Chancellor Angela Merkel, and French President Nicolas Sarkozy have all stressed the importance of speeding the implementation of the bailout package, and that urgency will continue in Cannes. "I really think the pressure again will be from the U.S. and others on the euro zone to implement in full and speedily the measures they agreed to," says Jan Randolph, head of sovereign risk for IHS Global Insight. But Papandreou's call for referendum has thrown this goal into jeopardy. If the Greek people vote "no," that could mean a spreading crisis, and potentially even a Greek exit from the EU.
The referendum announcement made for worldwide economic shockwaves on Tuesday, savaging global markets. Papandreou will also face a vote of confidence with Greek lawmakers this Friday, making for a very uncertain atmosphere in the Hellenic Republic.
Help from China?
China is the subject of much buzz going into Thursday on the possibility of the country (as well as other BRIC states) helping to shore up the European Financial Stability Facility, the euro zone's bailout fund. Klaus Regling, chief executive of the EFSF, visited Beijing last week to ask for Chinese assistance in shoring up the fund.
The decision is not an easy one, as Li Daokui, a member of China's central bank monetary committee, told the Financial Times last week. "It is in China's long-term and intrinsic interest to help Europe, because they are our biggest trading partner, but the chief concern of the Chinese government is how to explain this decision to our own people," he said. "The last thing China wants is to throw away the country's wealth, and be seen as just a source of dumb money."
Li also said that China may ask European leaders to back off of their criticism of China's currency valuation, which keeps prices of Chinese exports artificially low. However, the U.S. Treasury Department has insisted that China's currency policy will be an issue at this week's meetings.
Protesters Stealing the Spotlight
Protests have already been underway in Nice, where French authorities have deployed an estimated 12,000 security forces in the area. Thus far, the protesters have captured attention by nonviolent means such as marches and nudity. Though the protests are not linked to the popular Occupy movement that has swept the United States and expanded into some foreign countries, they add to a growing global atmosphere of grassroots displeasure with political and economic institutions. This larger narrative, covered heavily by the media, could itself prove economically detrimental, says John Canally, inestment strategist and economist at LPL Financial. "I'm sure it will be nice weather in the south of France, good protest weather. ... It will make for some good pictures and print and video, and further undermine people's confidence in the global economic system," he says. For Americans far removed from current protests, the visuals could make for diminished confidence, he says: "I can already picture in my mind the opening shot of the you-pick-the-channel evening news at 6:30 on Thursday, Its' going to be a bunch of protesters lighting people in effigy...and when people see that, they [will] go, 'I thought they were fixing this. It doesn't look like they're fixing very much.'"