The G20 summit in Cannes is likely to turn into another eurozone crisis meeting amid desperate attempts to avert a disorderly default by Greece.
EU leaders and markets will also be looking to the meeting of the governing council of the European Central Bank on Thursday to announce a fresh round of measures to help the fragile banking sector.
EU leaders may be incensed by the failure of Greek premier George Papandreou to alert them to his plans but they are determined at all costs, first, to keep Greece in the euro and, second, to prevent contagion seeping so fast and so deep in from Italy that it brings the entire European economy down.
Angry and alarmed EU officials in Brussels indicated that the G20 summit would be used as a venue by host Nicolas Sarkozy, the French president, and Angela Merkel, the German chancellor, to promote an all-party government in Athens tasked with avoiding a disorderly default on Greek debt of €360bn.
The summit, according to Thomas Klau, head of the Paris bureau of the European Council on Foreign Relations, has already in all probability been "transmuted into yet another eurozone crisis summit" entrusted with restoring its collective credibility.
This credibility, he adds, has been completely undermined by Papandreou's unilateral action only days after a solemn eurozone communiqué promised closer co-operation and information-sharing.
Pressure is already being exerted on Greek opposition leader Antonis Samaras, of New Democracy, to moderate his populist anti-austerity line and help to negotiate the fine details of the second bailout programme agreed at last week's summit – notably on private sector involvement (PSI) or the scale of the haircuts bondholders should suffer to allow a €100bn writedown on Greek debt. These details may not be finalised until early 2012.
EU officials are desperately seeking to avert a slide into default. This would, in turn, according to one, "lead to the complete collapse of the Greek banking system, a capital flight out of the country, a huge panic in the markets, the triggering of credit default swap pay-outs, unbearable pressure on German, French and other banks, and, not least, contagion oozing out from Italy."
Their best hope of salvation, according to Klau, could rest with the "only institution capable of acting in times of extreme danger" and, moreover, "the only federal institution": the ECB. Its 23-strong governing council meets for the first time under new president Mario Draghi on Thursday.
Few are betting on an immediate cut in interest rates to, say, 1.25% but expectations are high that Draghi, a former Italian central bank governor, will continue and, even, accelerate the "non-standard measures" adopted under his predecessor, Jean-Claude Trichet. That means buying up Italian and Spanish bonds and making huge amounts of liquidity available to distressed European banks.
Klau believes the ECB will mandate itself to act as firefighter, shifting its eye from exclusive focus on inflation to financial stability as a whole. "The ECB will probably give signals that it will continue to do what it takes to avert a euro-area meltdown," he said last night.
There are a lot of seriously angry politicians in, notably, Berlin, Helsinki and The Hague – the northern centres of fiscal rectitude. They would be happy to see the back of Greece and, theoretically, there is nothing to prevent Athens doing them a favour and leaving the euro. With even the agreed latest €8bn bailout tranche for Greece already in doubt, it could happen sooner than anybody could imagine.