By The Associated Press
LOS CABOS, Mexico – European leaders at the G-20 summit struggled to reassure the world Monday that they were on the path to solving their continent’s relentless economic crisis, defending the pace of their response even as market pressures pushed Spain closer to needing a bailout that would strain the world’s ability to pay.
Less than 24 hours after an election that eased fears of a Greek exit from the shared euro currency, the interest rate that Spain pays on its debt surged above the 7 percent level that had forced Greece, Portugal and Ireland to seek international help.
The prospect of a bailout for Spain’s $1.39 trillion economy immediately eclipsed the good feeling at the G-20 from the election, and it dwarfed the host country Mexico’s expressions of confidence that the meeting of the world’s largest economies would lead to more than $430 billion in concrete commitment for the International Monetary Fund as insurance against future bailouts.
The Spanish delegation to the G-20 bemoaned the rise in the country’s borrowing costs and said the market reaction didn’t correspond to the reality of Spain’s economic strength.
The day was filled with statements from a variety of world leaders calling for cooperation and for Europe to solve its crisis at a summit that is expected to produce few concrete results.
“Now is the time as we’ve discussed to make sure all of us join to do what’s necessary to stabilize the world financial system, to avoid protectionism, to both grow the economy and create jobs while taking a responsible approach,” President Barack Obama said after meeting with the host, Mexican President Felipe Calderon.
European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy urged markets to focus on a European summit at the end of the month that they said would help the continent move closer to deeper economic and political integration to match its single currency. The lack of common rules for the countries sharing the euro currency is seen as the primary cause of the current crisis. The EU summit would bring progress on common banking rules for member nations, Barroso and Van Rompuy said, although they cautioned, in sometimes defensive tones, against expectations of short-term results.
“I can assure you that even if we in June will not take definitive decisions, the path, the trajectory is very clear for everybody,” Van Rompuy said. “In this case, the pace is less important than the decision we make.”
Barroso took a more aggressive tone, declaring that “the crisis originated in North America” with the collapse of real-estate-linked financial products and taking a subtle dig at China and other non-democratic countries at the summit.
“Not all the members of the G-20 are democracies, but we are democracies, and we take decisions democratically. Sometimes this means taking more time,” he said. “Frankly we are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy, because the European Union has a model that we may be very proud of.”
British Prime Minister David Cameron urged European countries to stay the austerity course to build investor confidence. He also warned against responding to economic turmoil by imposing protectionist measures. Specifically, the Conservative government leader said a free trade deal between the United States and the European Union “could provide an enormous boost across the world.”
“I think there is a threat of a failure to follow through with a long-term reform, particularly the banking reforms and the financial services reforms that were pioneered by the G-20,” Cameron said, “which if we don’t follow through could lead us to a repeat of the 2008 crisis all over again.”
Obama met Monday with Russian President Vladimir Putin to discuss differences between the two countries on Syria and Iran. Obama was also scheduled to meet with German Chancellor Angela Merkel, whose country plays a key role in brokering a solution to Europe’s debt crisis.