The two-day meeting, including G20 central bankers, comes in the run up to an October 23 EU summit due to adopt a comprehensive plan focusing on bank recapitalizations, further debt relief for Greece and bolstering euro bailout facilities.
In Brussels, an EU official said the bloc was planning to stretch the 440-billion-euro (607-billion-dollar) lending power of the European Financial Stability Facility (EFSF) by letting it guarantee 20 per cent of bond issues from troubled eurozone governments.
This would multiply ‘by five times’ its effectiveness, the official said – ensuring that the EFSF would be big enough to shield not just Greece, Ireland and Portugal, but also larger eurozone economies like Spain and Italy.
‘Europeans are trying to … dramatically increase the effective financial capacity of their fund,’ US Treasury Secretary Timothy Geithner confirmed in an interview with the CNBC broadcaster.
He said what the rest of the world ‘wants to see is Europe move. They want to see a more effective, more comprehensive financial strategy,’ that drew extra support from the International Monetary Fund (IMF).
German Finance Minister Wolfgang Schaeuble – who met French President Nicolas Sarkozy and Finance Minister Francois Baroin before the G20 talks – said the two EU heavyweights had ‘a joint position’ on the eurozone rescue plan.
‘I am convinced that, together, we will be able to protect our European currency and ensure its stability,’ Schaeuble said. A plan to ensure European banks had enough capital was being worked on now, he added.
Amid rumours of Brazil and China’s intention to come to the rescue, Geithner ruled out the need to increase the IMF’s bailout arrangements, which the United States and others would be expected to fund.
‘The IMF has very substantial uncommitted available financial resources,’ he noted.
Schaeuble echoed his comments, adding: ‘The IMF has enough resources to carry out its duties.’
The US treasury secretary reiterated calls for the euro area to put its house in order before the G20 summit in Cannes, France, on November 3-4, which is expected to deal with trade and the tensions over the alleged undervaluation of China’s currency.
‘We have a big problem with China,’ Geithner said. ‘And it’s partly because they’re not letting their exchange rate rise rapidly enough’ and partly linked to protectionist policies, he complained.
The eurozone’s crisis resolution plan was also expected to drive a harder bargain from Greece’s private lenders – forcing them to accept a ‘haircut’ of up to 50 per cent rather than the 21-per-cent hit offered to them in July.
To prepare for losses, banks will be told to hold more cash. All will be expected to try to do so through the markets, but national governments or, as a last resort, the EFSF will finance banks that fail to raise capital on their own.
The IMF has been calling for weeks for Europe to shore up its banks, but German bankers attacked the recapitalization plan on Thursday, arguing that it sent a counterproductive signal of vulnerability.
Underscoring the challenges facing the eurozone, the G20 talks were taking place in the wake of a Spanish credit-rating downgrade, forecasts of a growth slowdown in Germany and news that inflation in the currency bloc had shot up to 3 per cent in September.
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Paris/Brussels – Europe was on the spot Friday as finance ministers of the Group of 20 (G20) emerging and industrialized economies gathered in Paris, expecting the European Union to reassure them that the eurozone debt crisis would not spill over to the global economy.
The two-day meeting, including G20 central bankers, comes in the run up to an October 23 EU summit due to adopt a comprehensive plan focusing on bank recapitalizations, further debt relief for Greece and bolstering euro bailout facilities.
In Brussels, an EU official said the bloc was planning to stretch the 440-billion-euro (607-billion-dollar) lending power of the European Financial Stability Facility (EFSF) by letting it guarantee 20 per cent of bond issues from troubled eurozone governments.
This would multiply ‘by five times’ its effectiveness, the official said – ensuring that the EFSF would be big enough to shield not just Greece, Ireland and Portugal, but also larger eurozone economies like Spain and Italy.
‘Europeans are trying to … dramatically increase the effective financial capacity of their fund,’ US Treasury Secretary Timothy Geithner confirmed in an interview with the CNBC broadcaster.
He said what the rest of the world ‘wants to see is Europe move. They want to see a more effective, more comprehensive financial strategy,’ that drew extra support from the International Monetary Fund (IMF).
German Finance Minister Wolfgang Schaeuble – who met French President Nicolas Sarkozy and Finance Minister Francois Baroin before the G20 talks – said the two EU heavyweights had ‘a joint position’ on the eurozone rescue plan.
‘I am convinced that, together, we will be able to protect our European currency and ensure its stability,’ Schaeuble said. A plan to ensure European banks had enough capital was being worked on now, he added.
Amid rumours of Brazil and China’s intention to come to the rescue, Geithner ruled out the need to increase the IMF’s bailout arrangements, which the United States and others would be expected to fund.
‘The IMF has very substantial uncommitted available financial resources,’ he noted.
Schaeuble echoed his comments, adding: ‘The IMF has enough resources to carry out its duties.’
The US treasury secretary reiterated calls for the euro area to put its house in order before the G20 summit in Cannes, France, on November 3-4, which is expected to deal with trade and the tensions over the alleged undervaluation of China’s currency.
‘We have a big problem with China,’ Geithner said. ‘And it’s partly because they’re not letting their exchange rate rise rapidly enough’ and partly linked to protectionist policies, he complained.
The eurozone’s crisis resolution plan was also expected to drive a harder bargain from Greece’s private lenders – forcing them to accept a ‘haircut’ of up to 50 per cent rather than the 21-per-cent hit offered to them in July.
To prepare for losses, banks will be told to hold more cash. All will be expected to try to do so through the markets, but national governments or, as a last resort, the EFSF will finance banks that fail to raise capital on their own.
The IMF has been calling for weeks for Europe to shore up its banks, but German bankers attacked the recapitalization plan on Thursday, arguing that it sent a counterproductive signal of vulnerability.
Underscoring the challenges facing the eurozone, the G20 talks were taking place in the wake of a Spanish credit-rating downgrade, forecasts of a growth slowdown in Germany and news that inflation in the currency bloc had shot up to 3 per cent in September.
Article source: http://www.monstersandcritics.com/news/business/news/article_1668928.php/Europe-on-the-spot-at-G20-finance-ministers-meet-in-Paris