Representatives from the Group of 20 (G-20) industrialized nations are meeting with euro zone finance ministers on Friday and Saturday in Pairs to discuss potential next steps in combating the European sovereign debt crisis.
The meeting “isn’t expected to produce much in the way of concrete proposals, but could help lay the groundwork for a solution ahead of a crucial meeting of euro-zone leaders next weekend and a summit meeting of G-20 leaders in Cannes, France, in early November, economists said,” according to a report by MarketWatch.
The story went on to say that “For now, the focus is likely to be on efforts to boost the firepower of the International Monetary Fund. The Financial Times on Friday said emerging-market countries are examining ways to enhance the IMF’s lending power through a special purpose vehicle or through buying special IMF bonds.”
“The aim is to allow the IMF to play a greater role in any European rescue amid growing fears the crisis could hamper global growth, analysts said.”
“But the push appears likely to meet resistance from the United States, where Treasury Secretary Timothy Geithner emphasized that the Fund is sitting on large resources.”
Julian Callow, chief European economist at Barclays Capital, wrote in a note to clients that increasing the IMF’s capacity “could go a long way to rebuilding confidence in the euro-area sovereign debt markets and banking system, taken as part of a four-pronged approach involving also the EFSF, European Central Bank and, above all, efforts by the countries themselves which require assistance.”
While Callow appeared optimistic, his counterpart at Daiwa Capital Markets was just the opposite. Grant Lewis, an economist at Daiwa, argued that “While G-20 finance ministers are meeting this weekend in Paris, nothing of substance can be expected out of there.”
Instead, Lewis contended that “attention is therefore very much” on the aforementioned meeting of euro zone finance ministers next weekend.
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