G20: Why The Eurozone Crisis Is At Center Stage

The sound is familiar to any concertgoer -- the orchestra tuning up before the performance begins.

The G20, which is meeting in Cannes, is a symphony composed of leaders from the world's 20 most industrialized countries. And while there are lots of would-be soloists, there is no single conductor.

Will they, or won't they, be able to play together?

All everyone can agree upon is the immensity of what they need to do: Help solve the eurozone's financial crisis.

The crisis is now more than two years old and centers on the Greek government's inability to pay back the massive amounts of money it has borrowed over the past decade.

Those loans are so huge that the eurozone's own measures to bail out Greece have yet to bring Athens back to solvency.

The amounts the eurozone already has committed to trying to rescue Athens are dizzying.

A 110 billion euro ($150 billion) package of rescue loans in 2010.

A deal in the middle of this year to get banks to write off 21 percent of the money Athens owes them.

A commitment last month to create a package of 130 billion more euros ($179 billion) in rescue loans for Athens.

And a commitment last month by EU leaders to ask banks to raise the earlier 21 percent write-off of Greek debt to a full 50 percent.

Still Not Enough

Yet many world leaders fear those measures are still not enough to keep the overall eurozone crisis from pushing the West toward recession. That is because it is not just Greece that borrowed too much in recent years, but also several other eurozone states. Those states range from relatively small countries like Portugal and Ireland to ones with economies far bigger than that of Greece, such as Italy and Spain.

Here is one measure of how serious the overall eurozone crisis is: To have enough money to help all these troubled countries as – or if – necessary, the EU recently proposed raising the size of its bailout fund to nearly 1 trillion euros ($1.4 trillion).

No wonder, then, that everyone at the Cannes G20 summit seems to have urgent, but often differing opinions, about what to do.

There is, for example, the United States:

Many economists in the United States think the eurozone countries should do much more to reinforce their banks and economies in the crisis. Washington's approach in its own economic crisis was to cut interest rates and print more money to enable banks to get more capital.

But that is an approach that many eurozone countries resist. Germany, in particular, is skeptical of trying to manage economic crises through government spending. And it feels it already has contributed too much to bail out packages for Portugal, Ireland, and Greece already.

A Potential Rescuer

Germans may like to have fun and vacation in southern Europe, but they do not approve of their southern neighbors' spendthrift ways.

But the G20 summit and its efforts to contain the eurozone crisis are not just about Western countries. There is another player, too, which wants to be heard and is even being actively courted as a potential rescuer: China.

European governments want Beijing to buy more of the debt of ailing countries like Italy and Spain or even contribute money toward the eurozone bailout fund.

That China has the money, there is no doubt. Beijing has the world's biggest foreign exchange reserves, totaling some $2 trillion and traditionally has been a major buyer of U.S. government bonds. But whether it would do the same in the eurozone, and what conditions it might attach, remains shrouded in mystery.

Some analysts predict China would demand more access to European markets or demand Germany and other stronger eurozone countries provide guarantees for any money Beijing loans to their weaker partners.

As the G20 meets, almost no one expects the many players will be able to solve the eurozone crisis this week. The financial crisis has already proved not just hard to contain but extremely hard to predict.

Greece At A Crossroads

The months ahead look particularly uncertain because Greece, after originally promising to adopt strict austerity measures in exchange for help, now finds itself at a crossroads. Faced with mounting popular anger over the austerity demands, the government announced this week that it could conduct a referendum in December on whether to accept the latest bailout deal or not (although Papandreou now appears to be backing down from that idea).

Many analysts believe a referendum would effectively decide whether Greece stays in the eurozone or withdraws. But whether the current Greek government will even last long enough to hold any such referendum is itself an open question. It first has to pass a confidence vote in the Greek parliament on November 4 that could topple it.

On the first day of the G20 conference on November 3, eurozone leaders said they were preparing for every eventuality, including a possible Greek withdrawal from the euro.

Luxembourg's Prime Minister Jean-Claude Juncker, the chairman of eurozone finance ministers, said policymakers are now working on possible scenarios and that the effort is focusing on ensuring there is not a "disaster" for the people in other eurozone countries.

But with so many questions on the horizon, the only certainty is that the eurozone -- and the G20 -- are in the midst of one of their toughest economic challenges ever.

What everybody still hopes is that Greece's default on its debt can be an orderly one – carefully conducted by the eurozone to minimize the shock to the world financial system.

What everyone dreads is quite different. That is, that Greece's orderly default could yet turn into a disorderly one. And what that would sound like – with its possible shocks to the eurozone and its weaker countries – nobody would want to hear.