Byline: THE WASHINGTON TIMES
World leaders are gathered in Cannes, France, for the Group of 20 summit, with the European debt crisis at the top of their agenda. Greek Prime Minister George Papandreou's bombshell announcement that there will be a referendum to determine whether Greece will accept the bailout package devised last week has thrown a wrench into the plan on which the parties involved had banked to prevent the contagion from spreading to the fragile economies of Italy and Spain.
The first victim of this uncertainty is MF Global, headed by former New Jersey Gov. Jon Corzine, a Democrat. The firm filed Chapter 11 bankruptcy largely because of its exposure to European sovereign debt. Once again, President Obama will lead from behind. The U.S. economy no longer serves as a model for others, except insofar as our debt and soaring entitlement problems instruct others what not to do. Europe would rather turn to China and its massive currency reserves as a way to leverage the European Financial Stability Facility fund up from its current $616 billion. But Beijing doesn't seem inclined to buy risky European debt instruments, and quite wisely so. The Middle Kingdom is buying only the safest European bonds.
Less wisely, the People's Republic seems disinclined to reconsider its mercantilist trade and foreign-exchange policies, which require the maintenance of vast foreign-currency reserves. This isn't an efficient use of resources, and it ultimately hurts the Chinese people more than anyone else by artificially inflating the price of imports. …