No solution from G20 summit for EU debt crisis

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Fundamental differences over the European debt crisis are likely to prevent G20 leaders, from resolving the problem at their meeting in Cannes on 3-4 November, analysts said on Thursday.

Fundamental differences over the European debt crisis are likely to prevent G20 leaders, from resolving the problem at their meeting in Cannes on 3-4 November, analysts said on Thursday.

"My expectations are very low because we have so far not seen very convincing global cooperation on these issues," said European Policy Center chief economist Fabian Zuleeg.

"We do not have working global cooperation at the moment. We cannot address these issues. Every region, every country is trying to do its own thing without any regard for what is happening in other places. It is not helpful."

European Union states differ a lot in their views on how to tackle the crisis while there were no mechanisms to work together at a global level, he said.

"I do not expect anything from the G20 summit, either, agreed Troika Dialog investment house chief economist Yevgeny Gavrilenkov. "The starting conditions of the G20 countries are fundamentally different,"

To illustrate to which extent positions differ within the G20, he cited the example of a widely-discussed project aimed at introducing a tax on banking transactions. Gavrilenkov said it could be an effective measure in such a large economy with a serious financial market as the United Kingdom. The tax could allow British authorities to increase tax collection and replenish state coffers without damaging the financial system.

However, in emerging markets with a low monetary penetration, such as Russia and China, the measure would not bring considerable revenues to the state, but will hurt their financial systems deeply.
Gavrilenkov also said that current internal imbalances in large economies mattered even more than global imbalances.

"I do not think that there are any global imbalances which have popped up suddenly from nowhere. There are deep internal imbalances in every large economy, such as excessive and bloated consumption in the U.S., excessive investment in China and excessive redistribution in Europe, which can slow economic growth down and create the illusion that there are global imbalances."

The BRIC countries, which include Brazil, Russia, India and China, could offer help to the crisis-hit euro zone at the summit, Olga Butorina from Moscow State Institute of International Relations said.

"It seems to be rather vague now, but the idea could be one of the points of the agenda and a new page in global regulation," she said.

Russian Prime Minister Vladimir Putin showed skepticism toward the plan on Tuesday, saying the eurozone had enough resources to resolve its own problems without support from Moscow. Russia holds the world's third largest gold and foreign exchange reserves with over two-fifths invested in eurozone sovereign debt, and fellow BRIC countries.

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