Concerns about Europe's sovereign debt crisis topped the agenda yesterday at a meeting in Mexico City of G20 finance ministers, with financial sector leaders praising Greece's offer to repay bondholders at a steep discount.
The debate over whether European Union nations have contributed enough to emergency financial stabilisation funds to calm sovereign debt fears continued.
And the question of a further boost to the International Monetary Fund effort is likely to be discussed, but not solved, at the Mexico City meeting.
Angel Gurria, head of the Organisation for Economic Co-operation and Development, set the bar high in a speech, saying an adequate financial stabilisation fund would imply about US$1.5 trillion ($1.8 trillion), about three times the amount now committed by European nations, with about half a trillion coming from the IMF. "We still have to build the mother of all firewalls," Gurria said. "The thicker the firewall is, the less likely we'll have to use it."
US Treasury Secretary Timothy Geithner acknowledged the work of European leaders, saying they had "made quite a bit of progress in convincing the world that they are not going to allow a catastrophic financial failure" in their countries.
But he noted an expectation that "there are more things to come, more actions to come" on the financial firewall, saying leaders had moved "slower than some people would like".
"I hope that we'll see, I expect that we'll see continued efforts by the Europeans ... to put in place a stronger, more credible firewall," Geithner said, not mentioning any amount.
Asked how big the stabilisation firewall should be in an interview with CNBC, Geithner said simply, "Bigger than they have today."
German central bank president Jens Weidmann noted that Euro-area political leaders meet next month to decide whether to further increase the current €500 billion ($805 billion) financial stabilisation effort, and while he did not rule out increased funding, he said money alone would not do it.
"Higher walls of money can buy time, but that time must be used to tackle the roots of the crisis."