BRUSSELS (dpa-AFX) - Policy makers from the G-20 group of nations Saturday urged Europe to soon resolve their debt crisis that is hurting the global economy.
Finance ministers and central bankers from the world's leading nations met in France today to discuss ways to mitigate a worsening European debt crisis, along with other issues affecting the global economy.
In a communique, the G-20 said Europe needs to plan ways to fix the Euro-zone problems when EU leaders meet on October 23 for an Euro Area Summit in Brussels, where France and Germany are to articulate on ways to resuscitate an ailing banking sector.
With Greek on the brink of a default, the G-20 vowed to complement efforts to contain the spread of the crisis, stressing on the need to augment the impact of the European Financial Stability Facility, or EFSF - a 440 billion-euro rescue fund that can be used to recapitalize banks, buy sovereign debt, or lend to Euro-zone economies.
'We look forward to further work to maximize the impact of the' European Financial Stability Facility 'in order to avoid contagion, and to the outcome of the European Council on Oct. 23 to decisively address the current challenges through a comprehensive plan,' the G-20 said in a statement.
Germany and France on their part assuaged concerns, saying a plan to protect Europe banks is on the anvil. The two countries have been unequivocal in their support for a struggling Greece, which has struck to biting austerity measures.
The G-20 also voiced concerns over excess volatility in exchange rates and said emerging markets need more space for currency flexibility. The policy makers also said banks need to have enhanced capitalization and adequate access to funding.
But there was disagreement over whether the IMF needs to have more resources in the face of the European crisis. While vibrant economies like China favored more funds for the IMF, the US, Germany and Canada along with other nations said that the focus must be on solving the debt crisis.
Nearly two years after Greece revealed huge budgetary deficits that sent the Euro-zone into chaos, leaders are cracking their heads to find a solution. Greece needs an 8 billion euro in aid in October to pay government-owed wages and pensions. France and Germany are using that need as leverage to exact more cuts from Athens. Other countries that have required bailout include Spain and Portugal, with fears of sovereign debt crisis affecting Italy.
On Friday, Standard & Poor's downgraded Spain's long-term sovereign debt rating to AA- from AA, with a negative outlook, following on the footsteps of Fitch. There are also fears that banks in France, Germany and Switzerland might also see a cut in ratings or being put on watch, deepening fears of the crisis spreading out.
Though Europe does not have an easy solution to the crisis, details have emerged of a plan to include a bigger write-down than previously expected of Greek debt, which in July was set at 21 percent. The plan is now to raise it to as much as 50 percent. A more dramatic option is the use of the EFSF rescue fund to create a 'backstop' that could possibly acquire a stake in banks, or act as a guarantor for bank liabilities.
Today's G-20 meeting of policy makers is a precursor to a November 3 - 4 meeting of leaders in Cannes, France.
Copyright RTT News/dpa-AFX