Los Cabos, Mexico - World leaders' relief at Greek voters' rejection of an
anti-bailout government that could have forced the country's exit from
the European currency union had evaporated by early Monday on the
continued severity of Europe's economic problems.
Stocks and oil prices fell. Spain's borrowing costs
climbed past levels where Greece and two other European countries had
been forced to seek bailouts.
Heads of state began bilateral meetings ahead of the
G20 summit with the crisis facing Greece, Spain, Italy and other
European economies at centre stage.
Financing the Spanish government would likely be too
expensive for the eurozone bailout funds to handle. Spain's €1.1
trillion ($1.39 trillion) economy is bigger than those of Greece,
Ireland and Portugal combined.
"It is simply the result of the market reflecting once
again the notion that a comprehensive solution regarding containing the
financial crisis in Europe hasn't come forward yet and that still much
work has to be done in order for investors' confidence to return," said
Ishaq Siddiqi, market strategist with ETX Capital.
Both President Barack Obama and Mexican President
Felipe Calderon of the host country downplayed chances for concrete
results going into the summit.
Obama on Monday was meeting Russian President Vladimir
Putin and German Chancellor Angela Merkel, whose country plays a key
role in brokering a solution to Europe's debt crisis.
Calderon tried to give a more optimistic message over
the weekend, saying that he expects the G20 to produce record donations
to the International Monetary Fund (IMF), exceeding member states' pledges of
$430bn this year and bolstering its ability to conduct more
bailouts in Europe.
There were, however, clear signs of deep divisions over
this relatively straightforward measure. Calderon said the US would
decline to contribute, a decision in line with Washington's position
that more IMF money would be a de-facto US bailout of Europe.
unclear how much money would come from emerging economies such as Brazil
and India, which have been pushing for more say in the governance of
the IMF in exchange for greater contribution.
The morning's concerns were a sharp contrast from the
relief on Sunday night after the Greeks voted to support a pro-bailout
"What's happened in Greece is good news," Spanish Prime
Minister Mariano Rajoy said. "The Greek citizens have done the right
"The European Union is going to help Greece, because the European
Union is and must be a joint project that seeks the well-being and the
material improvement of all European citizens."
Chinese Deputy Finance Minister Zhu Guangyao stressed the importance of stability in the wake of the Greek vote.
"We hope this new government will be on a solid footing
and can maintain stability since stability is important to promoting
development," Zhu said.
"We believe that Greece should stay within the