The Group of 20 meet in Washington D.C. on Thursday and Friday for talks on how to avert a sovereign-debt crisis in Europe. Three years after the collapse of Lehman Brothers and the fallout affecting the global economy, once again a major crisis is threatening to rock the world’s financial system. Europe’s future and the economic recovery of major economies in the world is at stake.
Economists, investors, and consumers alike are calling on financial leaders to make some significant policy changes that will ensure movement forward. The financial leaders hope to prevent a sovereign-debt crisis facing Greece and Europe in order to avoid financial turmoil in world markets.
“We have entered a dangerous new phase of the crisis,” said Christine Lagarde, managing director of the International Monetary Fund. “To navigate it, we need strong political will across the world, leadership over brinkmanship.” World Bank President Robert Zoellick has commented that the time for muddling is over. He stated it’s time to fix the problem.
Pieces of the multi faceted approach have become clearer, and the meeting of the Group of 20 should solidify the steps to move forward.
There are two main factors driving the crisis. First, political discord within Europe over how much support to give indebted euro-zone governments that are implementing tough fiscal austerity programs; and second, vulnerabilities within the region’s financial system, especially in France where banks hold 671.6 billion euros of government debt of high-deficit euro-zone countries. German officials have also exacerbated the cycle by talking about a Greek default or leaving the euro zone altogether. Germany is the largest economy in the euro zone.
The world will be watching to see if the Group of 20 have the political as well as the financial resolve to tackle this crisis before it gets completely out of hand.