It was certain that Greece would figure prominently on the agenda of the G20 summit held at Cannes, France. Just a week earlier, European leaders had sealed an agreement over Greece's sovereign debt. It envisaged a drastic, 50 per cent reduction in the value of Greek bonds held by banks and in private hands, and a big boost to the euro zone's main bailout fund. As a follow-up of these measures, it called for a massive recapitalisation of Europe's leading banks. In return, Greece was required to make huge sacrifices. That Greece's leaders would face huge problems in selling a severe austerity package to an unwilling electorate was anticipated. But the kind of political spectacle that was witnessed was beyond anybody's expectations. Amidst high drama, involving a flip-flop over a referendum, Prime Minister George Papandreou narrowly survived a confidence vote in Parliament. After stifling a revolt within his party, he pledged to seek an interim government that would secure a comprehensive accord to save the euro. Completely upstaged by the developments in Greece, the G20 summit achieved precious little by way of commitments from the rest of the world to back the euro zone's efforts to contain the contagion.

Specific proposals for getting the G20 countries to augment the resources of the European Financial Stability Facility (EFSF) made little headway. Nor was there any fresh commitment to boost the IMF's resources. The IMF, it was clarified by its Managing Director, will not be able to contribute to the EFSF because, under its mandate, the Fund can lend only to countries, not legal entities. Other ideas — for instance, that countries such as China and Brazil could lend to a special purpose vehicle seeded with money from the EFSF — have been played down. On a more positive note, Italy, the third largest economy in the euro zone, has agreed to have the IMF monitor its progress. The communiqué, even if bland, is somewhat reassuring. It calls upon every country to play its part in addressing the challenges facing the global economy and, in the medium-term, in strengthening the foundations for growth. It lays stress on familiar policy prescriptions such as rebalancing global demand, maintaining price stability over the medium-term, and reinforcing the social dimension of globalisation. Every country is urged to honour its commitment to reform the financial system. These are laudable objectives, but the real test for the usefulness of Cannes summit is whether it has met its short-term objective of calming the financial markets, reeling under the debt crisis.