G20 tells euro zone to fix debt crisis in 8 days
Updated: 2011-10-16 09:55
European Central Bank President Jean-Claude Trichet (R) talks to OECD Secretary-General Angel Gurria at the G20 meeting of Finance Ministers and Central Bank Governor at the finace ministry in Paris Oct 15, 2011. [Photo/Agencies]
In unusually direct language, finance ministers and central bankers of the Group of 20 major economies said they expected an Oct 23 European Union summit to "decisively address the current challenges through a comprehensive plan".
French Finance Minister Francois Baroin, who chaired the meeting, said Berlin and Paris, the leading euro zone powers, were well on the way to agreeing a plan to reduce Greece's debt, stop contagion and protect Europe's banks.
Non-euro countries highlighted the damage the European crisis was already doing to their economies and underlined the urgent need for action by the 17-nation single currency area.
"Europe needs to get its act together because unless the crisis is put to an end, it will start to affect emerging economies which have enjoyed strong growth," Japanese Finance Minister Jun Azumi said.
His Canadian counterpart, Jim Flaherty, said the risk of a global recession would be dramatically higher if next Sunday's European summit failed to deliver.
British finance minister George Osborne told reporters his continental euro zone colleagues "will have left Paris under no misunderstanding that there is a huge amount of pressure on them to deliver a solution to the crisis".
US Treasury Secretary Timothy Geithner told reporters he was encouraged that the latest EU moves towards an overall strategy to tackle the two-year-old crisis contained the right elements, notably a recapitalisation of European banks.
"They clearly have more work to do on the strategy and the details, but when France and Germany agree on a plan together and decide to act, big things are possible," Geithner said.
"I am encouraged by the speed and direction in which they are moving."
The communique urged the euro zone "to maximize the impact of the EFSF (bailout fund) in order to address contagion". EU officials said the most likely option was to use the 440 billion euro fund to offer partial loss insurance to buyers of stressed member states' bonds in a bid to stabilise the market.
Efforts by some countries to increase the IMF's warchest to fight the crisis ran into resistance from the United States and others on Friday, burying the idea for now and putting the onus firmly back on Europe.
Geither said the IMF already had very substantial financial firepower and Washington would support committing more of the existing resources to supplement a well-designed European strategy with more euro zone funding.
As the G20 finance ministers and central bankers met in Paris, anti-capitalist protesters rallied around the world, shouting their rage against bankers and politicians accused of ruining economies and condemning millions to hardship through greed and bad government.
Many of the protests, galvanized by the Occupy Wall Street movement, were small and peaceful. But in Rome hundreds of hooded rioters burned cars and smashed shop and bank windows in some of the worst violence in the Italian capital for years.