CANNES, France—While Greece was consumed by political turmoil, leaders of the Group of 20 industrial and developing countries on Thursday were scrambling to insulate the next most vulnerable economy: Italy.
Italy has become a prime concern of the Cannes summit because the U.S., China and other G-20 members are now worried that Europeans may fail to avert a complete collapse of the Greek economy. The downfall of Greece, with the accompanying sovereign default and corporate bankruptcies, would send a shock wave through Italy first, before roiling other nations.
Italian Prime Minister Silvio Berlusconi arrived early in this Mediterranean resort town to meet with other G-20 leaders and try to reassure them that his country has a plan to reduce its towering debt.
French President Nicolas Sarkozy, who is hosting the summit, said the credibility of the euro zone was on the line and that Italy had to provide further assurances that its deficit-reduction package was on track. „The question is not the content of the package but its implementation,” Mr. Sarkozy told reporters after a series of meetings Thursday with other G-20 leaders.
Italy is increasingly unable to raise debt at affordable costs and Mr. Berlusconi is struggling to push through austerity measures in the face of mounting labor unrest. Economists fear the euro zone isn’t equipped to deal with a collapse of Italy. „The most important aspect of our task over the next two days is to resolve the financial crisis here in Europe,” President Barack Obama said at a news conference.
Although they have indicated willingness to help, non-European G-20 leaders have made clear they want the euro zone to first rely on its own strengths to resolve its sovereign-debt crisis. „The solution to the bloc’s debt problems depends on Europe,” Chinese President Hu Jintao told Mr. Sarkozy, according to a statement posted on the website of China’s Ministry of Foreign Affairs.
Russian President Dmitry Medvedev said he hoped the Greek government „will have enough forbearance to stay the course and finally receive the funds to overcome the massive crisis that has hit their economy. … Everyone is interested in preserving the euro, not just the Europeans but Russia, China and other countries.”
The U.S. and some other G-20 members used Thursday’s summit to press euro-zone countries to tap the deepest pocket and most powerful instrument at their disposal: the European Central Bank. A commitment by the ECB to buy more bonds issued by beleaguered euro-zone nations would help restore investor confidence and bring down interest rates.
But Germany has repeatedly said it is against governments pressuring the ECB to step up its bond-buying programs, arguing that it would breach the bloc’s bylaws. The ECB has said it would purchase bonds issued by Italy and Spain but has also said the scope of such action would be limited in time and volume.
On Thursday, the G-20 members also discussed the idea of asking the International Monetary Fund to increase its financial support to troubled euro-zone nations, people familiar with the matter said. But support for the idea wasn’t guaranteed. Some IMF members have privately warned the fund that their compassion for euro-area woes was waning, pointing to the hardships that many other nations are going through.
Mr. Sarkozy said that for their part, euro-zone leaders were moving to accelerate the expansion of their bailout fund and fortify their countries’ banking systems.
A rare bright spot emerged from Frankfurt, where the ECB surprised investors by cutting interest rates to help support fragile economic growth.
As they seek to build a wall protecting Italy, G-20 members are also trying to stave off a downturn that threatens to pitch into a global recession. Germany and other countries with large surpluses in their economies pledged to take measures to spur domestic consumption, according to a draft of the action plan G-20 leaders are expected to agree to on Friday.
In Europe and elsewhere, the big savings of countries like Germany and China has been a sore spot for the spenders, who say that urging the populations of the saving countries to spend would boost economic growth. The U.S., for its part, pledged to take short-term measures to boost employment and to improve its fiscal position.
In the meantime, Greek politics descended into further mayhem. On Wednesday, France and Germany delivered an ultimatum to Greece, saying the highly indebted country had to provide quick reassurance, through a referendum if it so wished, of its desire to remain a member of the euro monetary union. Mr. Sarkozy and Germany’s Chancellor Angela Merkel also warned Greek Prime Minister George Papandreou that his country would get no more euro-zone rescue aid until that question is answered.
Mr. Papandreou carried the message back to Athens, but his own political fate looked increasingly uncertain Thursday. The embattled Socialist premier appeared to have lost his thin majority in Parliament and faces a no-confidence vote Friday.A defiant Mr. Papandreou rejected calls to resign on Thursday. Yet the prime minister also opened the door to creating a unity government with Antonis Samaras, the center-right leader of New Democracy, Greece’s main opposition party.
From Cannes, Mr. Sarkozy said any move by Greek politicians toward unity would mark a welcome development.
Radu Zlati 
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