Will a New Plan Stop the Euro Zone’s Sovereign Debt Crisis?
A new plan emerged as G20 finance ministers and central bankers began meeting in Paris to discuss a world economy under threat from European nations entangled in debt. The outlines of the plan are slated for submission at an October 23 meeting of the EU.
The news comes after Standard and Poor’s (NYSE:MHP) cut Spain’s long-term credit rating last week. Spain (NYSE:EWP) has a high unemployment rate, tightening credit, and high private sector debt. But the IMF’s dominant shareholders — including the United States (NYSE:SPY), Japan (NYSE:EWJ), Germany (NYSE:EWG), and China (NYSE:FXI) — are content that the fund’s $380 billion of resources is enough to prevent an economic collapse.
G20 sources said most BRIC economies (NYSE:BKF) were in favor of bolstering the IMF’s capital as a crisis-fighting tool. Japanese Finance Minister Jun Azumi said he would share with his G20 counterparts Japan’s “bitter experience” of failing to contain its 1990s banking crisis by doing too little, too late. The United States is among countries keen to keep pressure on the Europeans to act more decisively to end the two-year-old debt crisis that began in Greece but has since spread to Ireland and Portugal and is currently whipping Spain (NYSE:EWP) and Italy (NYSE:EWI).
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“Fears about the damage a default by Greece — and possibly others — could inflict on the financial system have driven a confidence-sapping bout of market volatility since late July, with global stocks falling 17 percent from their 2011 high in May,” according to Reuters.