With German growth story hitting the bump, Euro's 'default' moment is finally approaching fast. European policy makers across the board are coming to the conclusion that either they would have a tighter and coherent Fiscal Union (backed by Euro bond) or dissolution of Euro by year end is certain. UK and Italy have already joined the chorus.
With realization that China alone cannot provide the impetus for global growth, downing of twin engines of global economy - USA and EU - would rightly construct the background of 'G20 noise'. What can they do? Last time, globally 2 solutions were used - coordinated collective quantitative easing by central banks and stimulus. QE was used to provide liquidity to banks (which European banks would need now along with few American banks like BofA) as well as buy government debt. Same will be needed now.
For Obama Administration, considering the bombast by GOP, the best bet is globally coordinated action. That is what would provide it the needed insulation from political attacks. Bernanke indeed would embark upon QE3 as needed. Even Obama Administration can push some stimulus/government action through Congress as global pressure rises. When two Conservative Governments of UK and Germany come on board, likes of Wall Street Journal will be pushed back.
It is true that, while Economy is slowing; it will be hard for Merkel to push the final frontier - closer fiscal union. But there is no choice now and no more hiding. She can learn few tricks from Tea Party - how to take a national & global economy to the brink so as finally German People and law makers 'see the abyass' of broken Euro. Equally, global backdrop will help Merkel to sell the deal to German people.
In a way, hope of the world economy rests on Angela Merkel singularly. Meanwhile the leader of free world, by necessity and by his choice / style; as usual will be 'leading from behind'. Obama would have to 'fire shots' in this case by a gun on Merkel's shoulders.
Update - Zoellick is putting a caveat for G20 action, but I think we are invariably moving in that direction.