John Kirton: G7 Finance Ministers as First Responder for Global Financial Crisis

The G7 as First Responder
for Global Financial Crises

John Kirton, director, G8 Research Group;
co-director, G20 Research Group
June 17, 2012

On the eve of the seventh G20 summit, starting on Monday evening, June 18, in Los Cabos, Mexico, the much older, smaller, more intimate and cohesive G7 finance ministers’ forum proved again that it was the responsible first responder to the financial crises facing the global community. On Sunday evening, June 17, just as Asian markets were opening for Monday trading, G7 finance ministers issued a statement in response to the elections held in crisis-ridden Greece that day. This time the G7 brought good news by reinforcing the positive signal from Greek citizens, who voted for parties likely soon to form a stable coalition government that would meet its obligations to its European partners and thus ensure that the eurozone and the broader European Union would remain intact.

In their brief but very timely statement, G7 finance ministers promised to work with the next Greek government and declared that it was in “all our interests for Greece to remain in the euro area while respecting its commitments.” They reciprocally welcomed the “commitment of the euro area to work in partnership with the next Greek government to ensure they remain on the path to reform and sustainability within the euro area.”

This statement came just as politicians and publics in Greece and elsewhere were contemplating what the election returns meant and just as the bargaining to forma coalition government began. With the pro-European New Democracy Party coming first with 29.7% of the popular vote (with 98% of the vote counted) but the anti-bailout deal Syriza party coming second with 26.9%, there was still some scope for things to go wrong. This was compounded by the fact that New Democracy itself had pledged to seek revisions to Greece’s most recent bailout deal with Europe, even if it promised to respect the parameters and the principles it has set.

At the start of this second wave of political uncertainty from Greece, the G7 statement in its first two points synthesized the message from Greek voters as a pro-European and pro-fiscal consolidation and structural reform one. Yet the third point stated that the G7 would support the Europeans in working with the next Greek government to ensure not just reform but “sustainability” as well. This hinted that there would be some flexibility, which the Greek economy and people badly needed, as did New Democracy to keep its promise to them. Yet this prospective reward for good behaviour was not so big and bold as to put the process of forming a coalition government off track or to encourage those in Spain, Portugal and Ireland to demand a relaxation of the conditions of their own deals.

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