With Europe’s economic and financial woes weighing on prospects for global growth, officials said they had agreed to take “all necessary measures needed to stabilize the financial system” and to contain the troubles. The officials did not provide specifics, but said they were working toward introducing a grand plan at a meeting on Oct. 23 in Brussels.
The United States Treasury Secretary, Timothy F. Geithner, who along with President Obama has urged the Europeans to move more forcefully to keep the crisis from infecting the global economy, said he was “encouraged by the direction and speed” at which the Europeans were moving, and by French and German pledges to find a solution.
“But as you know,” Mr. Geithner said, the ultimate impact of Europe’s efforts is “all in the details, and it’s very hard to judge the impact that something will have until you see it take shape.”
“They clearly have more work to do on strategy and details,” he added.
European leaders have sharply raised expectations that a comprehensive solution will be introduced by the time the presidents and prime ministers of G-20 nations gather in Cannes, France, in early November to address the troubles in the global economy.
By doing so, they have set a high bar: investors have calmed the wild volatility that hit global stock markets the past couple of months, on the belief that leaders will produce measures to tackle the crisis within weeks.
It remains to be seen whether that trend will reverse if investors are unconvinced that the package will keep the crisis that started in Greece from spreading to Spain and Italy. That is the foremost goal of all the European efforts.
“The results of Oct. 23 will be decisive,” France’s finance minister, François Baroin, said at a news conference.
In the search for answers, the International Monetary Fund, which is overseeing the bailout of Greece, Ireland and Portugal, also floated the idea of raising hundreds of billions in new funds from its emerging market and other members. But Europeans want to avoid the perception that they need additional help from the I.M.F., and the plan seemed unlikely to gain traction.
The specter of a downturn in Europe has started to trouble leaders in other countries, including the United States and Britain, where officials have pressed the Europeans to strengthen their rescue fund for weak European economies and banks, and to ensure that the troubles in Greece do not engulf bigger countries like Italy and Spain.
Indeed, while officials pledged unity in fighting the crisis, some thorny divisions still lingered. G-20 leaders said they looked forward to “further work” to maximize the impact of the rescue fund, the European Financial Stability Facility, that is meant to keep the sovereign debt crisis in Greece from spreading to other nations and the European banking system at large.
German financial officials continued to express skepticism about expanding the facility, either by injecting additional cash into it, or through other, less conventional means.
Wolfgang Schäuble, the German finance minister, said proposals for expanding the effective size of the facility by letting it borrow from the European Central Bank were “not on the table,” saying this was against the bank’s mandate.
“Of course there are ways of taking advantage of the size of the E.F.S.F. in efficient ways to avert infection, but there is no sense, on the weekend before we have to decide on these things, to speculate about them,” he added.
After playing down calls by the I.M.F. for Europe’s banks to raise more capital, leaders now acknowledge that banks need to set aside hundreds of billions of euros in additional cash. The case became more urgent after Dexia, a troubled French-Belgian lender, had to be bailed out last week, raising questions about the need to recapitalize other banks.
Eric Pfanner contributed reporting from Paris.
Article source: http://www.nytimes.com/2011/10/16/business/global/europeans-struggle-toward-debt-solution.html?partner=rss&emc=rss