16 Oct 2011

European leaders urged to resolve debt crisis

8:05 am on 16 October 2011

Finance ministers from the G20 group of major economies have ended a meeting in Paris saying they expect a European Union summit to act decisively to resolve the euro zone government debt crisis.

EU leaders are to meet in Brussels on 23 October when they will consider a plan to strengthen Europe's banks, reduce Greek debt, and increase the power of the euro zone's bailout fund.

US Treasury Secretary Timothy Geithner told reporters he was encouraged that the latest EU moves towards an overall strategy to tackle the two-year-old crisis contained the right elements, notably a recapitalisation of European banks.

The communique urged the euro zone to maximize the impact of the EFSF bailout fund in order to address contagion.

European Union officials said the most likely option was to use the €440 billion fund to offer partial loss insurance to buyers of stressed member states' bonds in a bid to stabilise the market.

The head of the International Monetary Fund (IMF), Christine Lagarde, says emerging markets are feeling the impact of the euro zone's problems and are concerned about the risk that the crisis will spread to low-income countries.

On Friday, US President Barack Obama and German Chancellor Angela Merkel spoke by phone to discuss the crisis.

US officials said Mr Obama had warned of the risks posed to the US economy.