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G-7 finance chiefs vow to support banks

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Post by lexie Sun Sep 11, 2011 5:24 pm

September 11th, 2011

G-7 finance chiefs vow to support banks

PARIS: Group of Seven finance chiefs vowed to support banks and buoy slowing
economic growth as Europe’s debt crisis roiled financial markets and threatened
a global recession.

“We will take all necessary actions to ensure the
resilience of banking systems and financial markets,” G-7 finance ministers and
central bankers said in a statement released during talks in Marseille,

“Concerns over the pace and future of the recovery underscore the
need for a concerted effort at a global level in support of strong, sustainable
and balanced growth,” the statement said.

Renewed fears that European
policy makers are failing to prevent a Greek default and contain their debt woes
prompted investors to sell stocks and push the euro to a six-month low against
the dollar. European bank and sovereign credit risk reached all-time highs as
10-year Treasury and German bund yields fell to record lows on demand for a

Germany moved toward insulating its banks against the fallout of a
possible Greek default and Juergen Stark’s resignation from the European Central
Bank exposed the policy rifts aggravating the debt turmoil. Such shifts
highlight the biggest risk to international expansion since the collapse of
Lehman Brothers Holdings three years ago this month.

The sense of
disarray drew fire from G-7 officials with US Treasury Secretary Timothy F.
Geithner lobbying his European counterparts to get their act together. Canadian
Finance Minister Jim Flaherty even suggested Greece may need to quit the

European authorities “need to do whatever they can do to calm these
pressures,” Geithner told Bloomberg Television. “They have to demonstrate they
have enough political will.” Dogged by voter unrest and ideological splits,
Europe’s leaders have reignited investor unease less than two months since they
detailed their latest remedy for a crisis nearing its second anniversary.
Finland is demanding collateral from Greece in return for fresh aid and German
lawmakers want veto power.

Governments are also dithering over a revamp
and management of their regional rescue fund and falling short of the closer
budget ties investors say are needed to guarantee the euro’s future. There are
also questions over whether nations can cut deficits without derailing growth
and creating even more debt.

Central banks will “maintain price stability
and continue to support economic recovery” and provide liquidity “as required”
to lenders, while governments will pursue “growth-friendly.”


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