World leaders pressed Europe on Monday to do whatever it takes to combat the euro zone's debt crisis after a victory for pro-bailout parties in a Greek vote reduced the chances of a euro break-up but failed to calm financial markets. The world's major industrialised and developing economies are set to urge the euro zone to break the vicious link between its struggling banks and strained state finances, according to a draft communique prepared for the G20 summit and seen by Reuters.
It said Europe would take "all necessary policy measures" to resolve its crisis and said Group of 20 leaders looked forward to the euro zone working closely with a new Greek government to keep it on a reform path and in the currency bloc. Protected by Mexican navy vessels and troops on the beaches and highways, leaders from the Group of 20 countries representing more than 80 percent of world output began a two-day meeting in this Pacific resort to prioritise growth and job creation against the backdrop of a weakening global economy.
Escalating violence in Syria and the near-collapse of a United Nations-brokered peace plan will also be in focus when US President Barack Obama meets with Russian President Vladimir Putin on the sidelines of the summit on Monday. The two super powers are clashing over arming Syria and UN sanctions. But Europe's progress toward lasting solutions for its debt crisis will be the focal point when G20 leaders hold their opening session on the global economy in the afternoon.
Obama spoke with European leaders after the Greek vote and requested a meeting with them on Monday evening, underscoring the concern in Washington that the euro crisis could deepen, infecting a fragile US economy only months before an election. He was also due to hold separate talks with German Chancellor Angela Merkel, who, as the leader of Europe's biggest economy, faces enormous pressure to take bold new steps to resolve a crisis that has been raging for more than two years.
Obama, speaking in Los Cabos, welcomed Greece's election result as positive for forming a new government that could work well with international partners involved in its debt crisis, such as the International Monetary Fund. A narrow victory for the conservative New Democracy party in the Greek election on Sunday eased concerns the heavily indebted country could exit the euro zone soon but did little to calm financial markets.
The euro fell from a one-month high against the dollar and Spanish bond yields shot above 7 percent to their highest level since the creation of the single currency in 1999, despite agreement earlier this month on an aid package of up to 100 billion euros to shore up the country's ailing banks.
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