Yesterday, the finance ministers of the G7 (the US, UK, Germany, Japan, France, Italy, Canada) met in a hastily organized emergency session in an attempt to save the Eurozone. They gave out no agreed solution at the end. Yesterday also, President Hu and President Putin met together in Beijing. They gave out that it was about Afghanistan because they also had Iran, Mongolia, India, Pakistan and Afghanistan along, too. You can be certain, however, that by far the most important item on the agenda by a long, long chalk was a more private G2 meeting concerning the future of the Eurozone.
Just as a collapse of the Eurozone economy would produce a far deeper recession than already exists in the G7, so would it do the same for the G2. The Eurozone is China’s biggest market for its exports of consumer goods. The Eurozone is Russia’s biggest market for its exports of natural gas. (Indeed, without those exports, it is doubtful whether Russia would be able to build all the facilities it needs in order to host the 2016 Olympic Games.)
If we are realistic, the Eurozone problem is insoluble. The only point worth discussing is what to do about the pieces that will be left after its collapse. The G7 have kicked the can down the road again by saying that the Eurozone will be discussed at a G20 meeting later this month (by which time it is highly possible that both Greece and Spain will have become detached). The G2 have said nothing. So far, China has said that it will not help the Eurozone corporately until it sorts itself out. Russia cannot help. Besides, its wealth is mainly in the hands of oligarchs of varying degrees of criminality. They’re unlikely to put their hands in their pockets.
If any constructive post-mortem plan is, in fact, devised, then we’ll have to see whether it will be from the G7 or the G2. My guess is that it will be the G2 because it’s only been China and Russia that have been trying to persuade America for years to adopt a world trading currency which would have avoided all the current currency problems. Perhaps America will be persuaded this time as unemployment among its young starts to approach the proportions that already exist in most Eurozone countries.