The finance ministers and central bankers of major economies are expecting the October 23 EU summit to “decisively address the current challenges through a comprehensive plan”.
PARIS – Finance ministers from the world’s largest economies pledged Saturday to take “all necessary actions” to stabilize global financial markets and ensure that banks are well capitalized. “We will ensure that banks are adequately capitalized and have sufficient access to funding to deal with the current crisis,” the Group of 20 finance ministers said in a statement issued after a two-day meeting in Paris, CNN informs. The meeting comes as officials in Europe move closer to an agreement on a comprehensive plan to secure the banking system and resolve Europe’s long-standing sovereign debt problems.
The plan, outlined by European Commission president Jose Manuel Barroso last week, will be discussed in detail at a meeting being held by the European Council in Brussels on Oct. 23. “We heard encouraging things from our European colleagues in Paris about a new comprehensive plan to deal with the crisis on the continent,” said U.S. Treasury Secretary Tim Geithner in a statement. Geithner added that European leaders “clearly have more work to do on the strategy and the details.” But he sounded optimistic about the support the plan has received from Europe’s two largest economies. “When France and Germany agree on a plan together and decide to act, big things are possible,” he said.
European leaders have been under pressure to decisively resolve the debt crisis in Greece and increase the firepower of a recently overhauled bailout fund to provide a stronger “backstop” for other euro area nations struggling with unsustainable levels of debt, such as Italy and Spain.
The 27-nation European Union has also been grappling with the threat of a banking crisis, amid fears in financial markets that banks do not have enough capital to withstand the shock of a contagious sovereign debt crisis.
The G20 ministers welcomed the recently approved overhaul of the European Financial Stability Facility (EFSF), which now has power to intervene in the sovereign debt market and loan money to governments that need to recapitalize banks. The EFSF is still widely seen as needing additional “leverage” to address both the sovereign debt and banking crisis simultaneously. EU officials are expected to discuss ways to give the EUR 440 bln fund greater “firepower” at a meeting later this month, but increasing the amount of money the fund controls has been ruled out.
The “comprehensive plan” is expected to be formally presented early next month when the G20 heads of state meet in Cannes, France. Meanwhile, the G20 also said it made progress on an “action plan” to address problems in the global economy and help boost growth. The ministers said developed economies must continue to reduce debts and deficits, while taking steps to spur economic growth. Emerging economies need to address risks such as inflation and capital imbalances, the G20 said, adding that developing nations with export-driven economies need to stimulate domestic consumption. The G20 said it is taking “concrete steps” to strengthen the international monetary system, including the management of capital flows and exchange rates.
IMF must have adequate resources
The ministers also welcomed new surveillance powers by the International Monetary Fund (IMF), but the statement seemed to suggest that the G20 expects more from the multinational lending institution. Geithner said in his statement that the IMF has a “substantial arsenal of financial resources” that can be used to “supplement” Europe’s comprehensive plan. But he added that the IMF resources would be used “alongside a more substantial commitment of European resources.” IMF boss Christine Lagarde highlighted fears of a knock-on effect that could hit emerging economies. The G20 also pledged to continue working on plans to strengthen the global financial system and contain the risks posed by financial institutions that are deemed too-big-to-fail. The G20 consists of large, industrialized economies such as the United States, Germany, France, Italy, Japan, the United Kingdom and Canada. It also includes emerging economic powers China, India, Brazil and Russia
Obama to push for jobs bill piece by piece
WASHINGTON – President Barack Obama says he’s going to travel the country telling lawmakers to do their jobs and vote in favor of his economic proposals, and he says congressional Republicans should stop picking partisan fights and act, . Coming off a week when his nearly USD 450 bln jobs bill died in the Senate, Obama made no reference to that failure, instead promising to renew efforts to get Republicans to vote on individual components of the legislation. The bill includes extension of a payroll tax cut and unemployment benefits as well as spending on public works projects and help for local governments to keep teachers and other public workers on the job. On the other hand, U.S. President and German Chancellor Angela Merkel spoke by phone on last Friday to consult about the “evolving financial situation in the eurozone,” the White House said. The two leaders also discussed preparations for the next Group of 20 Summit in France, at Cannes early next month and agreed to stay in close contact in the run-up to the meeting.