Europe vowed to its G20 partners yesterday that it would take swift and decisive action to resolve a debt crisis that is threatening to drag the world economy back into recession.
The plan has the right elements
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 welcome the adoption of the ambitious reform of the European economic governance,” a joint statement after the meeting said, noting in particular the move to improve the flexibility of the eurozone rescue fund, the European Financial Stability Facility (EFSF).
“We look forward to further work to maximise the impact of the EFSF 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,” the statement said.
American Treasury Secretary Tim Geithner also said he was heartened by Europe’s reassurances.
“We heard encouraging things from our European colleagues in Paris about a new comprehensive plan to deal with the crisis on the continent,” Geithner told journalists after the talks.
“The elements of this plan include a much more substantial financial firewall to ensure that the governments of Europe can borrow at sustainable interest rates as they reform, a broad recapitalisation of banks, further support for a sustainable programme in Greece and steps toward fiscal union,” he said.
“The plan has the right elements,” he said.
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 per cent of the global economy, are seeking to come up with concrete steps to boost growth that their leaders can announce at a summit next month.
Among other measures, the G20 ministers also committed to ensuring the International Monetary Fund has adequate resources to deal with the debt crisis if it continues to spread.
The joint statement said the ministers had agreed that the IMF “must have adequate resources to fulfill its systemic responsibilities,” but made no mention of expanding the IMF’s resources to deal with the debt crisis.
Developing countries have spoken out in favour of boosting the IMF’s firepower in order to help Europe – something Germany is hesitant about and the US opposes.
The statement said the issue would be raised again during the November 3 and 4 summit of G20 leaders in the French city of Cannes.
Last Friday, US President Barack Obama called German Chancellor Angela Merkel to discuss the crisis and said the two should “stay in close contact” in the run-up to the G20 summit.