Finance ministers and central bank governors from the world’s leading economies agreed to coordinate their response to Europe’s financial crisis on a conference call that dealt with Spain and Greece.
Group of Seven officials said they will work together to help both euro-area countries place their public finances on a sustainable footing, Japanese Finance Minister Jun Azumi told reporters in Tokyo following the call. Azumi said he urged European leaders to do more to address investors’ concerns about the region’s finances.
European representatives “said they will speed up their efforts to resolve those problems, which was encouraging to us,” Azumi said. “Japan is ready to provide support if there is anything we can do.” The officials didn’t discuss a possible Greek exit from the euro, he said.
Less than two weeks before a Group of 20 summit in Mexico that will take place as Greece holds its second round of elections in as many months, German Chancellor Angela Merkel is facing increasing pressure from colleagues inside and outside the 17-nation euro area to apply Europe’s biggest economy to do more to stem the crisis. With the impact spilling over into the global economy, Spain for the first time appealed for external funding for its banking system.
Discussion on the call focused on the outlook for the global economy with particular emphasis on the situation in Europe, according to one G-7 official who was briefed on the discussions. Unemployment in the single currency area is at a record while the European Commission forecasts the euro-region economy will shrink 0.3 percent this year.
U.S. President Barack Obama, who said Europe’s recession is weakening U.S. growth in the run-up to the presidential election in November, toughened his language on June 1, saying the bloc’s leaders haven’t done enough to dispel the “cloud that’s coming over from the Atlantic.” Last month he spoke of “significant steps” that Europe has taken.
As the turmoil that began in Greece in late 2009 spreads to Spain, Spanish Budget Minister Cristobal Montoro today urged the EU to provide new funds for the country’s banks. Prime Minister Mariano Rajoy said June 1 he’s prepared to give up some control of Spain’s public finances and its banking system so that they can take shelter in a European fiscal union.
The extra yield investors demand to hold Spain’s 10-year debt instead of benchmark German bunds reached a record 548 basis points on June 1, raising doubts about the Spanish government’s ability to fund itself. Montoro said the treasury is struggling to sell bonds to investors.
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