Blogging the G-20 Summit in Los Cabos - Reflections at the Outset Posted by David Shorr

This week the protracted Eurozone crisis rolls into sunny Los Cabos for the G-20 summit, where it will be Topic A just as it was for the Cannes G-20 meeting seven months ago. For many, the crisis has prompted them to watch financial markets with a sense of dread. In a sense, then, the Los Cabos summit is a political / diplomatic market in which governmental leaders give market signals regarding their respective stances and policies. 

Even before the meeting started, Presidents Herman Van Rompuy of the European Union and Jose Manuel Barroso of the European Commission used a press conference to talk up Europe's stock. Van Rompuy boasted that the OECD gives Europe high marks for structural reform. At the same time, he acknowledged the flaws in Europe's monetary union and spoke forthrightly about the work that will be needed to make the union "solid, secure, and safe."

It is interesting to trace some of the hot topics here at Los Cabos back to earlier G-20 summits. Just over two years ago, the Toronto summit exposed deep divisions over austerity that have hampered G-20 action ever since then to strengthen the fragile recovery from the Great Recession. Now the question is whether weak economic performance and recent elections in Europe have re-tilted the debate.

The Van Rompuy-Barroso press conference was an interesting mix of defiance, recrimination, and flexibility, and it made for some interesting euphemisms. My favorites: Van Rompuy's "investment and differentiated fiscal consolidation" and Barroso's "mutualization of public debt." In the category of defiance, Van Rompuy said Europe "will not spend our way out of the crisis." And Barroso wanted everyone to remember "this crisis was originated in North America." Got that?

At the November 2010 meeting in Seoul, the leaders emphasized the importance of putting a global financial safety net in place to mitigate any future crisis. In Los Cabos the G-20 leaders are marshaling an infusion of resources to boost capitalization of the IMF.

It is a sign of the times that the safety net might be needed sooner rather than later. Which reminds me of one of the common depictions of the G-20 and its evolution. The group is often portrayed as shifting roles from the crisis response function it played in 2008-09 toward serving as a steering group for the global economy. But many observers have wondered whether the crisis has really been put behind us or, rather, has continued on for the last several years.