Li Xiangyang, Director of Institute of Asia-Pacific Studies at the Chinese Academy of Social Sciences, said, "The European debt crisis is rooted in the institutional arrangement of the euro zone—monetary integration lacks the support of financial integration. The unbalanced economic development of euro zone members is another major cause. Therefore, the problem should be resolved within the euro zone first."

Li said the G20 should show confidence in the ability of EU authorities to handle the euro-zone crisis, instead of focusing on aid. "For the current euro-zone crisis, confidence is more important than gold," said Li.

U.S. reluctance

Unlike emerging countries contributing to the recapitalization of IMF, the United States and Canada, two major non-European developed countries, are seemingly inactive in bailing out Europe.

Washington rejected the IMF recapitalization plan. Canadian Finance Minister Jim Flaherty insisted there should be no support for the euro zone until it sorts out its own problems.

"The United States sees Europe as both partners and competitors. On the one hand, the close economic link is the basis for their cooperation. On the other hand, the two sides are competing for the dominant role in the global economy. For a long time, the United States has worried that the euro might constitute a threat to the dollar's preeminence. Thus Washington hopes for a weaker euro," said Jia.

"In addition, 2012 is an election year in the United States. In consideration of votes, Obama would not spend money in helping Europe. Canada insists European countries are wealthy enough to save themselves," Jia added.

On the sovereign debt issue, even the policies of the two major euro-zone countries—France and Germany—differ from each other. Germany insists that the debt-stricken countries should implement a policy of fiscal austerity in order to cope with the debt crisis. French President Hollande, however, has claimed that the austerity approach downplays the importance of growth.

"The two major euro zone countries should strengthen coordination and work out an integrated plan in accordance with the overall interests of the euro zone. Only then can other countries offer more help," said Jia.

The Greece factor

Just a day before the opening of the G20 Summit, a piece of good news for both the summit and the euro zone came from Greece. The country's pro-bailout conservative New Democracy Party won the Greek general election, and stands a good chance of forming a new government to take over the heavy task of getting the country out of the debt crisis and deep recession.

However, observers are cautiously optimistic at the good news. Jia said, "The election result comes as a relief for the euro zone. It is certainly helpful for boosting market confidence, but it is only the first step. We should wait and see whether the party will be able to organize a pro-bailout cabinet."

"The problem of Greece is not simply whether it will exit the euro zone or not," said Feng Zhongping, Director of the Institute of European Studies at the China Institutes of Contemporary International Relations. "The victory for the New Democracy Party is only part of the story. The gaming between Greece and the EU as well as the IMF is just beginning. The New Democracy Party will be unwilling to accept entirely the austerity program put forward by the EU."

The Greek economy might continue to shrink in the next decade, Feng warned.

Both Feng and Jia said that the prospective pro-euro government in Greece may prove too unstable in pushing further austerity at home to seek the next bailout installment, as well as weak in negotiating with international lenders for softer terms.

However, the two observers said, the attitude of Germany to Greece seems to have become more flexible after the New Democracy Party won the election.

Chinese President's Proposals

G20 members should be firmly committed to

- promoting the steady recovery of the world economy

- deepening the reform of the international financial system

- promoting the healthy growth of international trade

- promoting development

- advocating sustainable development

(Source: Xinhua News Agency)

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