G7 LEADERS pledged to take “all necessary actions” to restore stability to world markets after a summit dominated by the euro zone debt crisis and the resignation of chief economist Jürgen Stark from the ECB.
With the euro hitting its lowest level in six months on Friday after news broke of Mr Stark’s early departure, G7 finance ministers and central bankers meeting in Marseille issued a statement affirming they would take concerted action to calm the turbulence.
“We will take all necessary actions to ensure the resilience of banking systems and financial markets,” they said, after a summit that officials said focused almost exclusively on euro zone problems.
The statement did not prescribe any specific policy direction, however, reflecting divisions between Europe and the US on striking a balance between growth stimulation and fiscal consolidation.
“We are committed to a strong and co-ordinated international response to these challenges,” the statement said, adding only that states should set out “growth-friendly fiscal consolidation”.
During a break in the talks, US treasury secretary Timothy Geithner warned European leaders had “a lot more to do” to “demonstrate to the world they have the political will” to protect troubled euro zone members.
Any expectations of a single co-ordinated response from the G7 after several weeks of market turmoil were dampened before the talks began, with France insisting there was no one-size-fits-all solution to the current problems.
Finance minister François Baroin, who hosted the two-day summit, alluded to differences over how to strike the balance between cuts and stimulus, adding: “Some are in favour of a uniform action. I’m inclined to look for what is best adapted to each country’s situation.”
The joint statement declared support for US president Barack Obama’s $447 billion (€327 billion) jobs plan and for Europe’s July 21st decision to beef up the powers of the euro zone’s EFSF bailout facility.
Speaking afterwards, ECB president Jean-Claude Trichet said it was “extremely important” for European states to approve the July 21st deal “completely, comprehensively and rapidly”.
That call was echoed by EU economic affairs commissioner Olli Rehn, who noted that while financial markets moved “in seconds”, the process of co-ordinating action across 17 euro zone states took weeks and months.
“Rapid implementation of these decisions is crucial for [resolving] the debt crisis,” Mr Rehn said.
Seeking to allay fears over European bank funding, Mr Trichet told the meeting European banks held some $5 trillion in collateral eligible for access to central bank funds.
Meanwhile, the G8 – comprising the G7 plus Russia – pledged $38 billion in financing to Tunisia, Egypt, Morocco and Jordan, widening a deal agreed in May.
The IMF, represented in Marseille by managing director Christine Lagarde, promised a further $35 billion in funding to countries affected by the Arab Spring uprisings and formally recognised Libya’s transitional council as a legitimate power.
Mr Baroin said the figure agreed at the weekend was roughly double a sum agreed in May, when the eight economic powers met in Deauville, northern France. Libya had also been invited to take part, he said. “The institutions pledged to increase their financial network to $38 billion compared with the $20 billion pledged at Deauville,” he told reporters. “These are not just words. An important step was taken this morning.”
IMF recognition is significant for Libya’s interim leaders as it means international development banks and donors like the World Bank can now offer financing.
“Libya attended this meeting as an observer and I’m very pleased to report that the IMF now recognises the interim governing council as the official government of Libya,” Ms Lagarde said.
She added an IMF team would be sent to Libya as soon as the security situation allowed it.
