TOKYO – Few recent elections have grabbed world attention in the way that Greece’s vote on June 17 did. Now that the center-right New Democracy, which finished first, has formed a coalition government with the center-left PASOK and the Democratic Left, the key issue for Prime Minister Antonis Samaras’s administration is whether it can implement the austerity measures agreed with Greece’s eurozone partners in exchange for continued support from the International Monetary Fund and the European Union.
The situation remains dangerous – and not only for Greece. Spain and Italy face the redemption of government bonds valued at €13.2 billion ($16.5 billion) and €17 billion, respectively, in July, with redemptions continuing every month thereafter like an unstoppable tsunami, ensuring continued turmoil in Europe and beyond.
Given the global menace posed by Europe’s sovereign-debt and banking crises, measures to strengthen the European banking system and encourage fiscal integration gained some momentum at the recent G-20 summit in Los Cabos, Mexico. The summit’s concluding statement declared that countries with ample finances are prepared to provide economic stimulus if growth weakens.
One result of this promise is that pledges to boost the IMF’s funding have now reached $456 billion. These pledges come on top of the $430 billion expansion of IMF funding that was announced in April, so the Fund should have the financial firepower to act in any crisis – if, that is, the money pledged at the G-20 summit is actually contributed.