Paris - A summit deal struck in Brussels overnight has saved the euro from collapse but wider measures are needed from next week’s G20 summit to keep the developed world from tipping into recession, French Finance Minister Francois Baroin said on Thursday.
In a concerted effort to end a two-year crisis, eurozone leaders struck a deal in the early hours for banks to accept a 50% loss on their Greek debt holdings and governments agreed to bolster the firepower of Europe’s bailout fund to € 1 trillion.
“It’s (this response) that will sort things out, that will get the eurozone out of trouble, that will enable the economy to rebound and will stabilise the eurozone and global growth,” Baroin told RTL radio.
Asked if the deal had saved the euro, Baroin said, “Yes, of course. There was a risk of contagion, it was a systemic crisis.”
It took more than eight hours of talks for bankers, heads of state and the International Monetary Fund to reach a deal which they hope will prevent the crisis from worsening and hurting global growth.
Baroin said the deal was a first step towards rebuilding confidence, but added that leaders of the Group of 20 industrialised countries - whose current presidency holder is France - would need to take further measures when they meet for a summit next week in the southern French city of Cannes.
“The G20 needs to take precise and detailed measures for countries that are still consolidating their budgets to continue their efforts, and concrete measures for countries that can support global activity to support it,” he said.
Europe’s crisis was a threat to global growth that would not be fully contained until all 17 members of the eurozone brought their budgets into balance, Baroin said, echoing German calls for safeguards against fiscal profligacy.
Financial markets reacted positively to the deal early on Thursday, with world stocks reaching their highest level since early September and the euro hitting a seven-week high.
One question remaining was whether the private banking sector could withstand a major cut in its outstanding loans to Greece.
The deal struck last night provides for a €106bn recapitalisation of European banks. Baroin said that in the case of French banks, €8.8bn of additional capital were needed, and that none of this would be funded by the taxpayer.
“French banks can use their own profits. And we’ll make sure that the reduction in their balance sheets comes first and foremost at the expense of dividends and bonuses,” he said.
In a concerted effort to end a two-year crisis, eurozone leaders struck a deal in the early hours for banks to accept a 50% loss on their Greek debt holdings and governments agreed to bolster the firepower of Europe’s bailout fund to € 1 trillion.
“It’s (this response) that will sort things out, that will get the eurozone out of trouble, that will enable the economy to rebound and will stabilise the eurozone and global growth,” Baroin told RTL radio.
Asked if the deal had saved the euro, Baroin said, “Yes, of course. There was a risk of contagion, it was a systemic crisis.”
It took more than eight hours of talks for bankers, heads of state and the International Monetary Fund to reach a deal which they hope will prevent the crisis from worsening and hurting global growth.
Baroin said the deal was a first step towards rebuilding confidence, but added that leaders of the Group of 20 industrialised countries - whose current presidency holder is France - would need to take further measures when they meet for a summit next week in the southern French city of Cannes.
“The G20 needs to take precise and detailed measures for countries that are still consolidating their budgets to continue their efforts, and concrete measures for countries that can support global activity to support it,” he said.
Europe’s crisis was a threat to global growth that would not be fully contained until all 17 members of the eurozone brought their budgets into balance, Baroin said, echoing German calls for safeguards against fiscal profligacy.
Financial markets reacted positively to the deal early on Thursday, with world stocks reaching their highest level since early September and the euro hitting a seven-week high.
One question remaining was whether the private banking sector could withstand a major cut in its outstanding loans to Greece.
The deal struck last night provides for a €106bn recapitalisation of European banks. Baroin said that in the case of French banks, €8.8bn of additional capital were needed, and that none of this would be funded by the taxpayer.
“French banks can use their own profits. And we’ll make sure that the reduction in their balance sheets comes first and foremost at the expense of dividends and bonuses,” he said.