G20 leaders finally admit Greece might leave the euro

Thank god for President Obama, or no one would have a clue what the G20 was doing yesterday, holed up as it was in its secret room in Cannes. ‘[Resolving the eurozone debt crisis] is the most important aspect of our task over the next two days,’ he explained. And there we were thinking they’d got together to coo over photos of the newest addition to Le Famille Sarkozy...

Another statement of the blindingly obvious (but one leaders had, until now, been absolutely refusing to acknowledge) came from German chancellor Angela Merkel, who finally plucked up the courage to admit that unless Greece can sort out the mess it’s got itself into, then it might (gasp!) have to leave the euro. ‘The referendum is about nothing else than the question does Greece want to stay in the eurozone? Yes or no,’ she said. Is she the new Iron Lady?

Of course, this is something we’ve known all along: if the Greek government continues its squabbles over whether or not to hold a referendum, those with the keys to the European bailout fund will begin to lose patience. The worry, though, is that if Greece departs, it’ll be followed by a raft of panicked economies. ‘Rats off a sinking ship’ comes to mind. (Whether that would be a bad thing or not is another question altogether: after all, without smaller, weaker economies to support, the euro would presumably be a stronger, more efficient currency. Just a thought).

Then again, those worries could be short-lived: Greek PM George Papandreou has already caved to opposition demands, saying that if they pass terms of the bailout agreed by European leaders last week, he’ll scrap the idea of a referendum. Although that’s all depending on whether he survives a confidence vote in parliament today. If he doesn’t, at least it won’t be his decision any more…

On the G20’s ‘to-do’ list for today, then, is Italy: namely, how to save it from suffering the same fate as Greece. One of the ideas is to inject some money into the International Monetary Fund (remember that? A sort of global economic watchdog) so that it can create a ‘financial firewall’ to protect countries teetering on the brink (ie. Portugal, Italy, Ireland, Spain. At this juncture we should point out that with Greece out of the equation, the acronym for troubled economies becomes rather less printable).

Italy is looking increasingly unstable, though: having failed (again) to agree on austerity measures, its borrowing costs have reached eye-watering levels: it’s now paying 5.1% on one-year loans – compared with Germany’s rather more sedate 0.3%. Analysts, then, are getting increasingly worried about its situation. ‘Italy holds the key to the debt crisis,’ BNP Paribas’ Luigi Speranza told the BBC. ‘Developments in Italy are a crucial test for the credibility of the anti-crisis framework set by the European Union.’

In short, then, not much has changed since crisis talks yesterday. Or the day before that. Or the day before that. But as leaders continue to have trouble agreeing, the crisis is getting worse. As Obama cheerily pointed out: what was originally concentrated in the eurozone is slowly beginning to ‘engulf the world’. Not one to mince his words, is he?