U.S. Treasury Secretary Tim Geithner and the rest of the G20 finance ministers pledged support for a European bank rescue plan.
NEW YORK (CNNMoney) — Finance ministers from the world’s largest economies pledged Saturday to take “all necessary actions” to stabilize global financial markets and ensure that banks are well capitalized.
“We will ensure that banks are adequately capitalized and have sufficient access to funding to deal with the current crisis,” the Group of 20 finance ministers said in a statement issued after a two-day meeting in Paris.
The meeting comes as officials in Europe move closer to an agreement on a comprehensive plan to secure the banking system and resolve Europe’s long-standing sovereign debt problems.
The plan, outlined by European Commission president Jose Manuel Barroso last week, will be discussed in detail at a meeting being held by the European Council in Brussels on Oct. 23.
“We heard encouraging things from our European colleagues in Paris about a new comprehensive plan to deal with the crisis on the continent,” said U.S. Treasury Secretary Tim Geithner in a statement.
Geithner added that European leaders “clearly have more work to do on the strategy and the details.”
But he sounded optimistic about the support the plan has received from Europe’s two largest economies. “When France and Germany agree on a plan together and decide to act, big things are possible,” he said.
Europe: Many hurdles, little time
European leaders have been under pressure to decisively resolve the debt crisis in Greece and increase the firepower of a recently overhauled bailout fund to provide a stronger “backstop” for other euro area nations struggling with unsustainable levels of debt, such as Italy and Spain.
The 27-nation European Union has also been grappling with the threat of a banking crisis, amid fears in financial markets that banks do not have enough capital to withstand the shock of a contagious sovereign debt crisis.
The G20 ministers welcomed the recently approved overhaul of the European Financial Stability Facility, which now has power to intervene in the sovereign debt market and loan money to governments that need to recapitalize banks.
The EFSF is still widely seen as needing additional “leverage” to address both the sovereign debt and banking crisis simultaneously.
EU officials are expected to discuss ways to give the €440 billion fund greater “firepower” at a meeting later this month, but increasing the amount of money the fund controls has been ruled out.
“We look forward to further work to maximize the impact of the EFSF in order to avoid contagion, and to the outcome of the European Council on October 23 to decisively address the current challenges through a comprehensive plan,” the G20 communiqué read.
The “comprehensive plan” is expected to be formally presented early next month when the G20 heads of state meet in Cannes, France. Meanwhile, the G20 also said it made progress on an “action plan” to address problems in the global economy and help boost growth.
The ministers said developed economies must continue to reduce debts and deficits, while taking steps to spur economic growth.
Emerging economies need to address risks such as inflation and capital imbalances, the G20 said, adding that developing nations with export-driven economies need to stimulate domestic consumption.
The G20 said it is taking “concrete steps” to strengthen the international monetary system, including the management of capital flows and exchange rates.
The ministers also welcomed new surveillance powers by the International Monetary Fund, but the statement seemed to suggest that the G20 expects more from the multinational lending institution.
“We committed that the IMF must have adequate resources to fulfill its systemic responsibilities and look forward to a discussion of this in Cannes,” the G20 said.
Geithner said in his statement that the IMF has a “substantial arsenal of financial resources” that can be used to “supplement” Europe’s comprehensive plan.
But he added that the IMF resources would be used “alongside a more substantial commitment of European resources.” The G20 also pledged to continue working on plans to strengthen the global financial system and contain the risks posed by financial institutions that are deemed too-big-to-fail.
The G20 consists of large, industrialized economies such as the United States, Germany, France, Italy, Japan, the United Kingdom and Canada. It also includes emerging economic powers China, India, Brazil and Russia.