Europe vows action to G20 on debt crisis
Europe vowed to its G20 partners Saturday that it would take swift and decisive action to resolve a debt crisis that is threatening to drag the world economy back into recession.
Speaking after a meeting of G20 finance ministers and central bankers in Paris, French Finance Minister Francois Baroin said the eurozone would present answers as soon as next weekend, when EU leaders meet for a summit in Brussels.
"The results of the October 23 summit will be decisive," Baroin said. "We are acting resolutely to maintain financial stability."
The G20 finance chiefs welcomed Europe's efforts but made it clear more needed to be done.
"We look forward to further work to maximise the impact of the (European bailout fund) in order to avoid contagion, and to the outcome of the European Council on October 23 to decisively address the current challenges through a comprehensive plan," they said in a joint statement.
US Treasury Secretary Tim Geithner said they "heard encouraging things from our European colleagues in Paris about a new comprehensive plan to deal with the crisis on the continent."
He said the plan includes a much more substantial financial firewall to ensure that the governments of Europe can borrow at sustainable interest rates, a broad recapitalisation of banks, further support for a sustainable programme in Greece and steps toward fiscal union.
"The plan has the right elements," he said, but added "they clearly have more work to do on the strategy and the details."
Brazilian Finance Minister Guido Mantega said the G20 nations were united behind them "but the solutions are in the hands of the Europeans".
German Finance Minister Wolfgang Schaeuble said Europeans were aware of their responsibility.
"We will resolve our problems, we are determined to take decisions by Cannes," he said, in reference to a summit of G20 leaders in the French city on November 3 and 4.
As the ministers met, tens of thousands were taking to the streets of cities across the world for a day of protest inspired by the "Occupy Wall Street" and "Indignant" movements, with clashes erupting in Rome as protesters set fire to a government office and riot police fired tear gas.
G20 nations, which represent 85 percent of the global economy, pledged to announce at the Cannes summit next month concrete steps countries will take to boost growth as the world economy skids.
International Monetary Fund chief Christine Lagarde warned the weakness of advanced economies "is beginning to hit emerging countries" that had supported the world economy during the previous economic crisis.
"We heard a lot from the emerging markets that they are very concerned about the risk of contagion," she added.
But the G20 ministers sidestepped whether to increase the resources available to the IMF, the world's lender of last resort, as emerging nations had sought.
Instead they committed to ensuring the IMF has adequate resources.
Geithner noted the IMF had nearly $400 billion in uncommitted resources, adding: "This is a very very substantial amount of financial firepower."
Reducing Greece's debt, now more than 150 percent of annual output, to a more sustainable level is emerging as a key element to resolve the eurozone crisis.
At a July summit eurozone leaders decided to ask investors to take a loss of 21 percent on Greek bonds as part of a second rescue programme for Greece, but experts are saying Greece needs to cut its debt by around half to put the country's finances on a firm footing.
Baroin said a decision on a new figure would be made at next weekend's EU summit.
The representative of private holders of Greek bonds said forcing them to accept greater losses would only encourage investors to sell other eurozone bonds.
"We do not see that a compelling case has been made to reopen the deal," Charles Dallara of the Institute of International Finance told the Financial Times.
Forcing investors to take losses would send shockwaves through the continent's financial and banking system.
After finally getting approval this week on boosting their European Financial Stability Facility (EFSF) bailout fund to 440 billion euros ($600 billion), eurozone leaders are already studying ways to leverage its assets up to 2.5 trillion euros.
EU Economic Affairs Commissioner Olli Rehn confirmed talks were underway on how to do this, but declined to specify which measures were being studied.
The new-look EFSF will be able to inject money into shaky banks or intervene instead of the European Central Bank to support weaker eurozone countries facing problems in raising fresh funds on the markets.
© 2011 AFP