G20 leaders working on $2-trn rescue deal by April
The world's leading economies worked on Sunday to line up a deal in April on a second global rescue package worth $2 trillion to stop the euro zone sovereign debt crisis from spreading and putting at risk the tentative recovery.business Updated: Feb 26, 2012 21:13 IST
The world's leading economies worked on Sunday to line up a deal in April on a second global rescue package worth $2 trillion to stop the euro zone sovereign debt crisis from spreading and putting at risk the tentative recovery.
Germany said it would make a decision in March on strengthening Europe's bailout fund, a move other Group of 20 countries said is essential to clear the way for throwing extra funds into the International Monetary Fund.
The two actions are part of the G20's efforts to build up massive international resources by the end of April - when the group next meets - and convince financial markets they can stem the euro zone's deep problems.
It would mark their boldest effort since 2008, when the G20 mustered $1 trillion to help rescue the world economy.
German Finance Minister Wolfgang Schaeuble said European leaders will tackle the adequacy of the region's firewall during March. The issue will be on the agenda of a European Union summit next week.
"But the month of March goes from March 1 to March 31. It will be reviewed again, also in the light of the developments that have since occurred, whether the stated dimension of the (European bailout) mechanism is enough or not," he said.
Berlin's willingness to discuss the size of Europe's firewall marks an important shift.
Facing political opposition to a second Greek bailout in its parliament, it has balked at enlarging Europe's rescue fund on the grounds that it would undermine efforts to impose fiscal discipline on indebted countries.
The softening of its stance came as Schaeuble said he assumes the Greek bailout package will win Bundestag support on Monday.
An agreement by Europe to merge its temporary and permanent bailout vehicles would create a $1 trillion war chest and open the door for other G20 countries to meet the IMF's request for $500-$600 billion in new resources, on top of its current $358 billion in funds.
Put together, this would total around $1.95 trillion in firepower.
But the G20 has no intention of easing its pressure on Europe by giving it a strong signal now that new IMF money is in the bag. Its communique when two days of ministerial meetings end on Sunday will merely state that the world's leading economies will review the resources of the IMF in April without setting a date for a deal, G20 officials said.
But they left no doubt the cash is needed to calm markets and secure economic growth. "In order to overcome the crisis, you have to get ahead of the curve and have a big enough bazooka," said Olli Rehn, European Commissioner for Economic and Monetary Affairs.