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Published 20 June 2012 07:46, Updated 21 June 2012 00:02
”The task we face to restore global growth is an ongoing challenge” ... Prime Minister Julia Gillard in Los Cabos. Photo: Reuters
Europe has told G20 leaders it would “take all necessary measures” to bring stability to the zone, improve financial markets and “break the loop” between sovereigns and banks ahead of a crucial European Union Council meeting next week.
Europe was told to take “concrete steps” to safeguard the integrity and stability of the euro zone, in a last ditch attempt to resolve the debt crisis. The communique released from the G20 meeting yesterday said the Euro members were told to create a more “integrated financial architecture, encompassing banking supervision, resolution and recapitalisation, and deposit insurance” and to move “expeditiously” toward growth.
It advocated strengthening competitiveness in deficit countries and promoting demand and growth.
The four European members of the G20 – Germany, Italy, France and Spain – will take the recommendations to the union meeting on June 28. The communique also said the United States would calibrate the face of its fiscal consolidation to avoid a sharp fiscal contraction in 2013.
It raised concern about protectionism as it pushed for a global trade deal and boosted the International Monetary Fund’s resourcing to $456 billion, even while some member economies faltered.
“We have a profound interest in seeing Europe prosper,” President Barack Obama told reporters in Los Cabos at the summit’s close.
“Our friends in Europe clearly grasp the seriousness of the situation and are moving forward with a heightened sense of urgency.”
The meeting came after elections in Greece led to a narrow victory for the pro-bailout New Democracy party, and as borrowing costs in Spain breached the 7 per cent level that forced bailouts for Greece, Ireland and Portugal.
“All G20 members will take necessary actions to strengthen global growth and restore confidence,” the communique said.
“Advanced economies will ensure that the pace of fiscal consolidation is appropriate to support the recovery, taking country-specific circumstances into account, and address the concerns about medium-term fiscal sustainability.”
While the 14-page communique runs through the recommendations under 10 headings, much of the work went on behind closed doors at the Mexican beach resort.
The meeting was seen by parties as acknowledgement that Europe would go ahead with critical steps amid the debt crisis. Countries like China were recognised for their contributions to the IMF to help stem the turmoil.
It came against the backdrop of presidential elections in the US and uncertainty about German Chancellor Angela Merkel’s ability to persuade her electorate of the need to take on a substantial burden to permit economic recovery.
The European meeting next week is understood to be considering a bailout of as much as €750 billion for Spain and Italy.
The meeting’s communique also called for countries to take an “active role” to fight corruption, which impedes economic growth, threatens the integrity of markets , undermines fair competition and destroys public trust.
“The situation in Europe is a stressful one, a stressful one for European leaders,” Prime Minister Julia Gillard acknowledged at the summit.