Market News – G20, IMF, World Bank meeting in Washington

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The following are some comments made by finance ministers and central bankers in Washington this week for a meeting of the Group of 20 and the semi-annual meetings of the International Monetary Fund and World Bank.

EU ECONOMIC AND MONETARY AFFAIRS COMMISSIONER OLLIE REHN, ON POSSIBILITY OF GREEK DEFAULT:

“Giving the impression that an orderly restructuring of Greek debt can be done in a neat and tidy way is somewhat illusory to my mind. As I said before, we are not seeing a Greek default as a plausible scenario, and we will not let Greece down to a disorderly default.”

“We need to recapitalize vulnerable banks in Europe.”

REHN ON IMF ESTIMATES OF EUROPEAN BANK RECAPITALIZATION NEEDS

“It’s essential that we continue to work in order to ensure sufficient recapitalization of European banks. In this regard we do not share the numbers of the IMF which have been published today and leaked three weeks ago. We share the same concern and I can just say that is a work in progress.”

REHN ON ITALY REFORMS

“In terms of fiscal policies, for the moment, it is very difficult to demand more from Italy while at the same time it would be extremely important that Italy take further decisions on structural reforms to boost economic growth.”

REHN ON EUROBONDS

“Before we can even seriously contemplate a kind of eurobonds alternative, we need to substanatially reinforce economic and fiscal surveillance in the European Union.”

IMF MANAGING DIRECTOR CHRISTINE LAGARDE ON BALANCING ACT:

“What needs to happen is that medium-term, long-term, solid well-anchored measures that will actually aim at restoring good public finances by reducing deficits, by stabilizing debt and gradually reducing it, has to be first and at the forefront of any agenda in those economies. But, having said that, as long as in the long and medium term this is well anchored, some countries can accommodate growth in the short-term. If you’re asking me which country clearly the United States is one that comes to mind right away. There has to be a parallel track of what can accommodate growth in the short term by slowing down the pace of consolidation and how strongly and definitely and well anchored are the measures that will deliver deficit reduction in the longer term.”

BANK OF JAPAN GOVERNOR MASAAKI SHIRAKAWA ON YEN RISE

‘Global investors are seeking safer assets amid heightening uncertainty over the global economy, which is driving current yen rises. It’s important to remove uncertainty over the global economy.’

JAPAN FINANCE MINISTER AZUMI ON NATIONS HELPING THE EURO ZONE:

“Europe first needs to solve its problems by itself.”

‘Japan and the United States may be able to help Europe based on past experiences. In Japan’s case, we were saddled with huge bad loans at banks which ended up being much bigger than what policy-makers initially estimated.”

“When Europe deals with its sovereign risk problems, it’s important for them to not underestimate the problem and to seek steps that gives confidence to markets.’

“If Europe gives more clear direction on how to rescue Greece, Japan may consider further support. We are already buying about 20 percent of EFSF bonds but that’s not to say we will not increase the amount”

FRENCH ECONOMY MINISTER FRANCOIS BAROIN:

“The (G20) meeting is to coordinate our response on stabilising the euro zone and on stimulating global growth.”

“Liquidity problems at European banks have been tackled by central bank actions last week.”

On the euro zone: “Our strategy has not changed, it is still to implement the July 21 agreement as quickly as possible.

“The main issue (for the euro zone) is reducing deficits as quickly as possible. Leveraging the EFSF is not a priority for now, we could eventually consider how to leverage it to give it more systemic firepower.”