Fin24

G7 agrees to closely monitor euro crisis

2012-06-06 08:40

Washington/Brussels - G7 finance ministers and central bank governors agreed on Tuesday to focus special attention on eurozone banking developments ahead of the G20 summit in Mexico, according to US and Canadian officials.

The meeting of officials from the Group of Seven industrialised countries came amid speculation that Spain will need a bailout - the latest crisis to hit the eurozone.

The European Central Bank (ECB) was to meet on Wednesday, with renewed turmoil in the eurozone and faltering global economic growth likely to force the Frankfurt-based bank into a possible rethink of its current strategy, which could mean a cut in interest rates.

On Tuesday, the United States urged Europe to strengthen its banking system.

A European Union spokesperson dismissed suggestions that the G7 conference call was a sign of the bloc's economic crisis getting worse.

Amadeu Altafaj, spokesperson for EU Economy Commissioner Olli Rehn, told reporters in Brussels that it was a "regular" exchange that was not "extraordinary".

In Washington, White House spokesperson Jay Carney said the G7 officials had agreed to monitor financial developments closely ahead of the Mexico G20 summit on June 18 and 19.

The officials had discussed "the policy response under consideration, including the progress towards financial and fiscal union in Europe", Carney said.

The Canadian finance ministry released a statement with similar wording, the Globe and Mail newspaper reported.

Carney said the United States faced large "headwinds" from the two-year-long eurozone crisis, since its economy is so intertwined with that of Europe.

He urged Europe to maintain its sense of "urgency" about its financial crisis and said the US was taking steps to "insulate the American economy" from challenges posed by Europe and elsewhere.

"There is much work to be done in Europe," Carney said.

"We're hoping to see accelerated European action over the next several weeks, including in the run-up to the (G20) meeting in Mexico," Carney said.

"A movement to strengthen the European banking system will be of particular importance in this time period."

Speculation about Spain needing an international bailout has been plaguing the EU in recent weeks, as the country struggles to tackle problems in its banking sector.

"That there is concern about the situation in Europe, frankly I find that completely normal," Altafaj said. "We are the first to confront it. We are not sweeping anything under the carpet."

The G7 encompasses Britain, Canada, France, Germany, Italy, Japan and the United States. European officials such as Jean-Claude Juncker, the president of the Eurogroup panel of EU finance ministers, have also taken part in past meetings.

Altafaj said that the European Commission is "always involved in these exchanges" and that although Rehn was in Riga on Tuesday, "phones work everywhere". He declined, however, to confirm his participation.