At the end of a tumultuous two-day G-20 summit in France, the portents are good for the world economy as Europe's politicians learnt the hard way that they have to take primary responsibility for their debt crisis.
By the end of the summit on November 4th, Italy, the third largest European economy, agreed to a quarterly monitoring arrangement by the International Monetary Fund (IMF). The arrangement is expected to restore some of Italy's credibility and boost confidence in the debt market.
"We welcome Italy's decision to invite the IMF to carry out a public verification of its policy implementation on a quarterly basis," said the communication issued by the leaders at the summit's close.
In addition to monitoring Italy, IMF got the backing of G-20 to start a 'Precautionary and Liquidity Line' to provide liquidity support for countries with strong fundamentals that become collateral damage of the bond market's loss of faith in sovereign debt. This move will act as a short-term safety net for core euro zone countries in uncertain times.
The highlight of the summit was the tough message euro zone politicians got from other leaders. Leaders such as Australian Prime Minister Julia Gillard did some plain speaking and pointed out that euro zone countries should put their house in order.
The usually diplomatic Prime Minister Manmohan Singh
told journalists during an interaction at the end of the summit that "euro zone countries should get their act together."
Indian officials who participated in summit talks said there was an all-round sense of disappointment about the manner in which euro zone politicians had let things drift.
Meanwhile, even before the summit began on November 3, fast changing events in Greece's politics overwhelmed months of painstaking preparation on the summit's agenda.
On the eve of summit, France and Germany called for a joint press conference to announce that promised aid to Greece would be frozen till the referendum announced by Prime Minister George Papandreou was completed. It was followed by IMF managing director Christine Lagarde halting the process to release aid to Greece in mid-November till the verdict of the referendum was out.
If the Greek referendum, which was subsequently called off, shocked other leaders of the euro zone, the hard-nosed approach of other countries on providing resources for a bail out is perhaps the best thing that happened for the world economy.
Leaders from the so-called BRICS ( Brazil, Russia, India, China and South Africa) met to exchange views on this. Following the meeting, BRICS leaders' made two points through a written statement: Europe had to take responsibility for its problems and international help would have to come through IMF.
That does not preclude bilateral deals between a euro zone support system such as European Financial Stability Facility (EFSF) and China. China, in the recent past, has bought EFSF's bonds. The bond purchase, however, is on commercial terms.
Even in the case of help through IMF, there are no soft packages available for euro zone.
Arkady Dvorkovich, 'Sherpa' (term for the personal representative of head of state) of the Russian Federation did not mince words during an interaction with journalists as the summit drew to a close.
"We are talking about loans, it's not for free," Dvorkovich said, explaining Russia's support to euro zone through IMF would have a commercial dimension to it.
According to Dvorkovich, finance ministers of G-20 would meet soon to work out modalities to enhance IMF resource base to support euro zone. India's 'Sherpa,' Montek Singh Ahluwalia estimated that IMF had free resources of about $ 250 billion at the moment.
The subtext of Dvorkovich's press conference also indicated that emerging markets may use the opportunity to push for promised reforms in IMF's governance structure so as to increase their influence in decision making.
"Fulfilment of previous promises is a must," Dvorkovich said. "If not, it's clear we are not moving in any direction further," he added.
For the Indian delegation, the summit had mixed results. Prime Minister Singh pointed out that any development that pulled euro zone back from the brink would have an indirect benefit for India.
India may be more vulnerable than other countries to uncertainty stemming from euro zone's problems as its external sector is sensitive to capital flows. With a current deficit in April-June quarter of $ 14.2 billion, India is sensitive to developments that adversely impact capital flows into the country Deutsche Bank said in report released last week.
The guidelines for Mutual Assessment Process (MAP) of G-20 was finalised in Cannes and the Indian team, which was part of a core team that worked on it for over a year, was pleased with the outcome. MAP is a detailed peer review process that feeds into the need for enhanced economic cooperation among G-20, which contributes to about 80 per cent of global gross domestic product.
Prime Minister Singh said he was happy that the final summit communication called for increased banking transparency and exchange of information to combat tax fraud. The world has moved towards greater transparency over the last three years in this area. Indian tax officials, however, have often said that all exchange agreements assume a certain degree of rigour in domestic investigations into alleged crime. Regardless of what G-20 says, eventually India has to raise standards within to benefit from a favourable external environment.
The downside of the trip for Prime Minister Singh was that a scheduled bilateral meeting with French President Nicholas Sarkozy did not take place. According to Indian diplomats, the cancellation had to do with events in Greece and not with a sudden chill in Indo-French relationship.
On balance, the world is probably marginally better off at the end of the G-20 summit.