"The G-20 didn't go well for anybody, especially for the Europeans," says economist Nicolas Bouzou, head of Asteres Consultancy in Paris, which advises French firms. "Emerging countries, leading investors, and debt buyers in Europe are irritated by the European decision process, which they consider too slow, without any structural reforms. They seem incapable of speaking with a single voice, even between Germany and France.”
While Merkel and new French President François Hollande agreed substantially on the idea of a financial transaction tax as a tool to finance European growth, it did not appear in the G-20 draft. Significant gaps exist between the two leaders over how to approach Europe's woes.
Debates in Los Cabos largely turned on austerity versus growth, and the German model of balanced budgets versus the Keynsian model of stimulus, to answer Europe’s rising unemployment and banking debt.
But Europe has debated this for more than a year, with little change. At the G-20, Ms. Merkel held firm on the need for the new Greek government to adhere to austerity-based bailout agreements.
Meanwhile, across the Atlantic, the issues continue to compound: Spain, Europe’s No. 4 economy is twisting in the wind with unsustainable bond rates; it is scheduled to sell two- and three-year notes tomorrow, and if rates don’t change, Spain may only have a few more weeks of solvency, financial analysts say.
Italy, the No. 3 economy, is also on the ropes. Italy's caretaker prime minister, Mario Monti, suggested at the G-20 that the two eurozone rescue funds begin buying debt from stricken European states.