Eurozone Crisis: Canada Urges 'Extraordinary Actions,' But No One Sure What Those Should Be

Stephen Harper G20 Summit Eurozone Crisis

First Posted: 11/03/11 07:55 AM ET Updated: 11/03/11 11:24 PM ET

CANNES, France - French President Nicolas Sarkozy issued a dark warning against the "explosion" of Europe on Thursday even as Greece appeared to pull back from a referendum plan that's undermining a crucial financial bailout.

But while Sarkozy was raising the spectre of Europe's devastating 20th century wars, Prime Minister Stephen Harper offered a more soothing take, saying "cooler heads will prevail."

The extraordinary day of fast-moving events came as G20 leaders, including Harper, began 24 hours of talks aimed at stabilizing the global economy and avoiding another world recession.

The long-scheduled summit was overtaken by events in tiny, troubled Greece, where a snap decision to put a painful austerity package and eurozone bailout to the people for a vote had all but deep-sixed the $1.4 trillion package.

By the end of Thursday with his government teetering, Greek Prime Minister George Papandreou was stepping back from the brink, suggesting the referendum can be scrubbed if his conservative opposition buys in.

"Of course if we have consensus ... we wouldn't have to go to a referendum," Papandreou said in a speech to the divided Greek parliament.

The opposition responded by demanding his resignation and storming out.

Greece's footdragging has raised the prospect of the deeply indebted nation removing itself from the 17-nation eurozone, which shares the euro, and — by extension — from the 27-country European Union.

Sarkozy, who late Wednesday night had conceded to that possibility, was warning by late Thursday that the end of the common currency would be catastrophic.

"We cannot accept the explosion of the euro, which would mean the explosion of Europe," Sarkozy told a news conference before the G20 leaders went into a working dinner Thursday evening.

"If the euro exploded, Europe would explode. And in fact it's the guarantee of peace on the continent where there were terrible wars — fiercer than anywhere else in the world — not in the 15th century but in the 20th century."

Harper told Canadian reporters that contingency plans for Greece's exit from the eurozone were discussed during talks Thursday afternoon, but that events in Athens appeared to be moving in the right direction.

"My expectation is that cooler heads will prevail and the (bailout) package will be accepted and we'll move forward on that basis."

The prospect of Greece leaving the eurozone and messily defaulting on its massive debts has global implications, even though the moribund Greek economy accounts for less than two per cent of the eurozone's output.

Stocks rose sharply Thursday as markets began betting the referendum will be abandoned.

Sarkozy met with U.S. President Barack Obama before the summit proper Thursday morning and came away claiming agreement on a way forward.

"We have found a common analysis to make the financial world contribute" to the European crisis, Sarkozy said.

But French and German demands for a financial transactions tax have met stiff resistance from the U.S., Britain and Canada, so it was not clear where the common ground lay.

Sarkozy said Brazil and Argentina are now supporting the idea, further ratcheting up the pressure.

The financial tax notion also got a high-profile boost Thursday from Bill Gates, the billionaire tech tycoon and philanthropist.

Gates gave an address to the G20 leaders in which he urged them not to cut back on aid during these tough times. He's been pitching a plan to tax fuels, financial transactions and tobacco to help fund new aid development.

"The world will not balance its books by cutting back on aid, but it will do irreparable damage to global stability, to the growth of the global economy and to livelihoods of millions of poor people," Gates was quoted.

The fast-moving events left Canadian officials putting up a brave — if somewhat incoherent — front.

A spokesman for the prime minister maintained as the talks began that details of Europe's proposed $1.4-trillion bailout package need to be completed and swiftly implemented, even amidst the Greek impasse.

"The preference is for action now, sooner rather than later," Andrew MacDougall said at a briefing just before the opening session of the summit.

Harper's chief spokesman added that Europe needs to take a stand "that reflects a political willingness to take extraordinary actions to address extraordinary circumstances."

Canadian officials were at a loss to explain what those extraordinary actions might look like, however, nor were they ready to pronounce on the advisability of Greece going the referendum route.

MacDougall reiterated Canada's position that Europe pay for its own bailout. "This is to be a European-led and -financed solution."

Harper's key message, or fervent hope, appears to be that the summit not be totally derailed by the eurozone's current meltdown.

"It's important that, while we do have the proximate challenges of Europe, that there are the longer-term and medium-term work that the G20 has to do and continue to make progress on," said MacDougall. "We will make progress on those fronts."

Finding enough oxygen to fan the G20's reform flames will be the challenge.

The G20 leaders are supposed to discuss reform of the international monetary system, suppression of volatility in commodity prices, and food security.

The summit slogan — "L'Histoire s'ecrit a Cannes," or history is being written in Cannes — shouts from posters across this city on the French Riviera, known for its glittering film festival and conspicuous consumption.

But it appeared the summit's script was being written in Athens.

After weeks of crisis-atmosphere negotiations, a bailout package was achieved just days before the Cannes conflab, only to be knee-capped by Papandreou's surprise announcement Monday of a referendum.

A fresh round of emergency meetings Thursday morning in Cannes included officials from Spain and Italy, two heavily indebted eurozone members who are considered too big for Europe to bail out.

All but lost in the morass is a likely decision here to give the job of mending global finances to Bank of Canada Governor Mark Carney.

Carney is widely reported to be the frontrunner to lead a revamped and beefed-up Financial Stability Board, which will oversee and attempt to enforce reforms in global financial regulation.

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Filed by Daniel Tencer  |