Forex News – G20 urges Europe to deliver debt crisis plan in a week

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The G-20 officials who met over the weekend in Paris, said the global economy faces “heightened tensions and significant downside risks” that must be addressed.

They vowed to keep banks capitalized and financial markets stable, while reiterating an aversion to excess currency volatility. They also considered shortly naming as many as 50 banks as systemically important, two officials said.

Meanwhile, European Union Economic and Monetary Affairs Commissioner, Olli Rehn said that euro-zone officials are “close” to an agreement on how to capitalize banks.

Europe’s “revamped” strategy to beat its two-year sovereign debt crisis won the backing of global finance chiefs, who urged the region’s leaders to deal “decisively” with the turmoil when they meet for emergency talks in a week’s time. They want European leaders to deliver a plan at the European Union Summit in Brussels on October 23 and endorsed parts of the emerging plan to avoid a Greek default, bolster banks and curb contagion.

“The plan has the right elements,” U.S. Treasury Secretary Timothy Geithner told reporters in Paris.

However, if European leaders fail to deliver a plan to solve the sovereign debt crisis in Europe, this would endanger the world economy.

“The risk of a recession would be increased dramatically were the Europeans to fail to accomplish goals that they’ve set for themselves,” Canadian Finance Minister Jim Flaherty said after the G-20 meeting, which ended October 15.

Two years ago Greece triggered the financial turmoil in Europe that pushed the Greek government to the edge of default and the European economy close to recession.

Greek Prime Minister George Papandreou faces the latest test of his party’s unity as soon as this week when he asks Parliament to approve steps including bigger pension and wage cuts as well as plans that may lead to the dismissal of 30,000 state workers. The Greek parliament has to be able to win enough voted to approve the new austerity measures in order to ease the way for more international financing.