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G20 finance chiefs gather to tackle global crisis

(AFP) / 13 October 2011

PARIS - Finance ministers and central bankers from the world’s top economies meet in Paris this weekend to strengthen the faltering global economy and protect ailing banks from Europe’s ballooning debt crisis.

At a briefing ahead of the G20 meeting of finance ministers Friday and Saturday, a French official said the top priority would be to tackle the eurozone financial crisis.

“The G20 is taking place in a context where the absolute priority is to find solutions to stabilise the eurozone,” said the official, speaking on condition of anonymity.

The eurozone is “the epicentre of the global crisis,” the official said, adding: “If we cannot stabilise the eurozone, we will face problems in the months to come.”

The Paris meeting comes as eurozone leaders race to finalise a response to the bloc’s debt crisis, with plans to shore up banks threatened by the debt troubles plaguing the single currency area.

Greek Prime Minister George Papandreou was holding talks with EU president Herman Van Rompuy in Brussels on Thursday, as the eurozone waited for Slovakia to finally back a rescue fund aimed at solving the crisis.

Europe was given a scare when on Tuesday Slovakia’s parliament rejected an overhaul of the eurozone’s main defence against the crisis, the European Financial Stability Facility (EFSF).

But the centre-right government struck a deal with the left-wing opposition to hold a new vote by Friday, in return for early elections in March.

EU leaders had pressed for a new vote in the wake of warnings from the United States and China for Europe to get its house in order quickly for the sake of a weakening global economy.

France holds the rotating presidency of the G20 group of leading economies and the French official said Thursday that measures proposed at the weekend will be brought to the G20 summit in Cannes in the first week of November.

He said states with sufficient revenue to stimulate recovery should be asked to do so, while France and some others “concentrate on consolidating budgets.”

France hopes the finance ministers’ meeting will also come up with proposals on a code of conduct for managing capital flows, the official said.

An agreement on a calendar for the convertibility of the Chinese currency, the yuan, would also be “ideal” ahead of the summit in Cannes on November 3-4, the official said.

Moving quickly on the eurozone crisis will be key as the official said exposed banks will probably be forced to write off more Greek debt than the 21 percent proposed in a July accord on a second bailout for Athens.

He said EU states would be looking to set up a mechanism to allow banks in difficulty to seek assistance but that the statutes of the EFSF would not change to allow it to support banks as well as states.

Non-eurozone finance ministers are expected to press their counterparts in the bloc for firmer action on the crisis.

Japanese Finance Minister Jun Azumi told reporters this week that he wanted “Europe to talk about what scheme ... it is going ahead with.”

In a letter published on Tuesday, 450 economists also called on the G20 to take urgent action to stop speculation on commodity markets that is fuelling hunger.

“Excessive financial speculation is contributing to increasing volatility and record food prices, exacerbating global hunger and poverty,” the economists wrote in the letter on behalf of the World Development Movement.


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