Europe’s financial crisis deepened and enveloped Spain, raising pressure on German Chancellor Angela Merkel at a meeting of world leaders to shift her stance on shielding the global economy.
Group of 20 chiefs are meeting at a two-day summit in Mexico today as Spanish borrowing costs soared to a euro-era record. With elections in Greece failing to damp the threat of contagion, policy makers are deliberating ways to stimulate the world economy if necessary, a Canadian official said. Merkel, who last week criticized U.S. debt levels, said June 15 she’ll press the G-20 to hold to prudent government spending.
Enlarge image
A Caja Madrid bank branch, part of the Bankia group, was vandalized during a protest against Spanish banks in Madrid on June 16, 2012. Spain's bond yields surged the most since the euro was created in 1999 this week after the nation requested aid for its banks and asked the European Central Bank for more financial support. Photographer: Angel Navarrete/Bloomberg
Enlarge image
A demonstrator is detained during a protest against Bankia, outside its headquarters in Madrid on June 16, 2012. Photographer: Andres Kudacki/AP Photo
“It’s not a complete beating up session, but Germany is the recipient of fairly caustic criticism from other members of the G-20,” Rob Carnell, chief international economist at ING Bank NV in London, said by telephone. “The pressure will be on Germany to give more ground and behind closed doors Merkel may well be more accommodative. There is ground for the euro zone to move, but just what it does depends on how much Germany digs its heels in.”
G-20 leaders are gathering in the Mexican Pacific resort of Los Cabos for a summit being dominated by the crisis in the 17- nation euro region that threatens to further erode the weakest global economy since the 2009 recession. Spain’s Prime Minister Mariano Rajoy is also attending, as the respite in markets after elections in Greece yesterday proved short-lived.
Euro Drops
Stocks erased their gains and the euro fell today as Spanish 10-year bond yields leaped above the 7 percent level that forced Greece, Ireland and Portugal to call for sovereign rescues for the first time since the euro’s creation.
G-20 officials met late into the night to discuss a mix of measures to secure the global recovery including deficit reduction for some countries and pledges for additional stimulus by others with sounder finances, the Canadian official said on condition of anonymity because the negotiations are private. Canada was pushing for language in the communique that would call on European nations to take strong action, the official said.
