Global recession grows closer as G20 summit fails
IMF to monitor Italy to ensure austerity as leaders fail to agree plan for financial aid for distressed countries
Patrick Wintour and Larry Elliott in Cannes
A world recession has drawn closer after a fractious G20 summit failed to agree fresh financial help for distressed countries and debt-ridden Italy was forced to agree to the International Monetary Fund monitoring its austerity programme.
Financial markets fell sharply after the two days of talks in Cannes broke up in disarray, amid concerns that Italy will now replace Greece at the centre of Europe’s deepening debt crisis.
UK hopes that the Germans would relent and allow the European Central Bank to become the lender of last resort for the euro were also dashed.
On a day of unremitting gloom and yet more market turbulence, the Greek prime minister, George Papandreou, won a late-night confidence vote in his parliament after making a speech in which he promised to start powersharing talks to form a caretaker coalition government. Although he won the vote by 153-145, he is now expected to step down and a national unity government is expected to take over in the coming days.
Papandreou said he would visit the country’s president on Saturday to launch power-sharing talks “with the [opposition] parties … for the formation of a government of broad co-operation.”