PM heads to Mexico for crucial G20 talks

17 Jun 2012, 3:25 pm   -   Source: AAP
Prime Minister Julia Gillard is about to leave Australia for a crucial G20 meeting. (AAP)

Prime Minister Julia Gillard is about to leave Australia for a crucial G20 meeting. (AAP)

Prime Minister Julia Gillard will attend a Group of 20 meeting in Mexico this week.

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Prime Minister Julia Gillard is flying into tight security at the Group of 20 meeting in Mexico, amid fears the continuing financial crisis in Europe could lead to another round of global economic turmoil.

The gathering of world leaders in the Mexican resort city of Los Cabos on Monday and Tuesday follows heightened concerns the single-currency eurozone could be further destabilised by the election outcome in Greece.

Greek citizens are on Sunday choosing between a conservative government committed to economic and fiscal reform and a popular radical left party, which is against austerity measures attached to an international bailout plan and could lead Greece out of the euro.

While a clear result may not be known before the G20 summit ends, the leaders are still expected to canvass ways to secure the global economy and endorse more funding for the International Monetary Fund.

The money would be used to bail out debt-challenged European countries unable to borrow funds in global credit markets because of investor fears they might not pay it back.

Ms Gillard and South Korean President Lee Myung-bak on the weekend issued a joint statement urging "resolute action" to address the fiscal uncertainty.

"We need a clear message from Europe that it is taking decisive steps to stabilise and strengthen its banks," they said.

Treasurer Wayne Swan said whatever the outcome in Greece, the challenges were profound.

"The situation in Europe continues to cast a shadow over the global outlook," he said in a weekly economic note.

But Mr Swan continued to talk up Australia's economic fundamentals.

"We should never lose sight of the fact that we face the challenges in the global economy from a position of strength," he added.

Outgoing World Bank president Robert Zoellick warned Europe was facing a "Lehmans moment" and risked setting off another global financial crisis.

The 2008 collapse of the US-based financial services firm Lehman Brothers sparked the last global financial crisis.

"There could be a Lehmans moment if things are not properly handled," he told British newspaper The Observer.

Ms Gillard left Australia around 11am on Sunday and was expected to arrive in Los Cabos in the afternoon local time to address a B20 business forum being held on the sidelines of the G20.

There was a big police presence in Los Cobos on Saturday, with officers conducting exercises with riot shields on the main streets as soldiers carrying automatic weapons travelled around the resort area in jeeps.

Before the G20 starts on Monday, the first results from the Greek election will start filtering through.

G20 host President Felipe Calderon of Mexico played down expectations the annual summit will be able to respond, saying the focus is on long-term solutions.

"In any case, I think our efforts in the G20, and the efforts of other European countries, are to construct scenarios in which the economic future of Europe isn't dependent on the Greek case," he said on Saturday.

But financial markets are expected to react negatively if Greek voters give power to the anti-austerity Syriza party.

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