G20 must call for reforms

A slim victory for pro-Europe parties in the Greek election has saved the G20 leaders the trouble of making their two-day summit in Mexico a crisis management meeting.

It was widely believed that a disorderly Greek exit from the euro would unleash global financial turmoil.

That is why Chinese President Hu Jintao deemed Europe's debt crisis "an issue of general concern" and urged the other G20 members to "encourage and support efforts made by Europe to resolve it and send a signal of confidence to the markets".

But the leaders of the world's largest advanced and emerging economies shouldn't breathe a sigh of relief simply because the worst-case scenario seems to have been avoided. The pro-Europe vote does not mean the problems of Greece will be over anytime soon, as Europe is yet to find a real solution for its debt crisis.

With the risks of recession still rising, the G20 leaders should realize that the stakes are higher than ever as the latest crisis tests their determination and power to promote world economic stability, recovery and growth.

In the wake of the 2008-09 global financial crisis the G20 leaders quickly coordinated global moves to support growth through large stimulus packages and aggressive interest-rate cuts by central banks. And their strong leadership helped reverse that global downturn.

Unfortunately, almost four years later, global leaders have to brace themselves for a possible worldwide lending freeze similar to the one that happened when Lehman Brothers went under in September 2008.

However, while recognizing the urgency for strong and swift actions to prevent the eurozone debt crisis from spilling over into the rest of the world, G20 leaders should also begin to focus their efforts on deeper reforms to reinvigorate growth, especially in those debt-laden rich countries.

Short-term measures such as credit easing and emergency cash injections are keeping the patient on life support, but these measures alone are not enough to spur strong and sustainable growth to eventually get debt-laden countries through their financial and economic crises. Nor will printing more money or adopting too much budget austerity without a genuine growth plan help solve their basic problems.

To address their deeper structural issues these countries must speed up structural reforms and investment in new sources of growth.

This is a badly needed message that G20 leaders should work together to send.