BERLIN — Prime Minister Stephen Harper has arrived in the eye of a European debt crisis as EU countries attempt to get ahead of their plunging capital and currency markets.
A week-long European trip that began for Harper in Brussels — where he made reassuring sounds about the European Union’s recent $140 billion emergency loan program to Greece — ended with German Chancellor Angela Merkel conceding at Harper’s side that “the stability of the eurozone as a whole is not guaranteed with this program alone.”
Merkel was fresh off a late Friday meeting in Brussels, where the 16 countries that share the euro agreed to build an emergency fund for countries under seige by bond markets and a mechanism to respond quickly to future crisis.
The EU had hoped their recent bailout for debt-laden Greece would calm markets, but after a feverish week it was clear more was needed.
The leaders also agreed to new curbs on financial sector speculators, whom some are blaming for the recent contagion that has spread from Greece to Portugal and Spain.
Merkel acknowledged: “The situation is serious . . . . I think it’s important we act with determination and at the same time stay calm.”
Harper, as leader of next month’s G20 summit in Toronto, will have to help coordinate a global response to a situation that threatens to overtake the fourth meeting of the new international grouping since it coalesced in 2008.
A number of leaders, including Harper, have said the Toronto G20 is critical to giving the fledgling organization legitimacy by taking concrete and achievable actions.
The European financial crisis will be a crucial test of their collective will.
But analysts wonder if the crisis will wait for the G20 leaders to meet seven weeks from now, and agree on action.
“The problem is now,” said John Kirton, director of the G8 and G20 research groups at the University of Toronto.
Officials from the smaller and richer G7 are in frequent contact on the crisis, but they have yet to commit to making more bailout money available for Europe if need be -- in large part because most of the G7 are in fiscal trouble themselves. So eyes are wandering over to the broader G20, where a number of large countries are still in good fiscal health, said Kirton.
While the G20’s main raison-d’etre is preventing economic crises, the group is not really equipped to move quickly in a contagious situation like the one developing in Europe, Kirton said.
Harper said financial reforms proposed by a G20 working group of Canadian and Indian officials are being adopted by many countries, however “in some states the reform of the financial sector has not been as quick as we would like to see, and that work has to continue.”
Harper called it “absolutely essential that we get transparency and sound banking and financial sector practices . . . to avoid the kind of contagion we’ve seen in the past.”
The prime minister quickly added that while market speculation is adding to Europe’s current woes, “I don’t think we should forget that the primary crisis here, the fundamental crisis, is not in the financial sector, it is in the finances of certain goverments.”
Harper’s visit to Berlin coincided with the 65th anniversary of Victory in Europe Day — somewhat ironic given the continent’s current financial woes.
He spent less than six hours in the German capital, but before departing Harper visited the 1939-1945 Berlin Cemetery for downed Commonwealth air crews, where he laid a wreath at the monument and signed the guest book with Canadian veterans.
The stop concluded a five-day, four-country European tour for the prime minister and the end of a welcome reprieve from his domestic political headaches. He was to return to Ottawa late Saturday night.
The tour has focused primarily on G8 and G20 preparations and the re-emerging economic troubles caused by the Greek debt crisis in Europe — safe political territory for Harper, given Canada’s relatively sound finances.
The Prime Minister’s Office announced upon arrival in Berlin that five additional countries would be invited to next month’s G20 summit: Ethiopia, Malawi, the Netherlands, Spain and Vietnam.
The prime minister started his day in Zagreb, where he met with the Croatian president before touring 800-year-old Zagreb Cathedral.