The Group of Seven will probably have an “exchange of information about the markets” when discussing the Greek debt crisis on a conference call today, Japanese Vice Finance Minister Rintaro Tamaki said.
“All the financial markets are now in turmoil,” Tamaki, Japan’s top currency official, said today in an interview in St. Gallen, Switzerland. “The impact of the Greek crisis has gone beyond the border of the euro area. This is a global issue.”
The G-7 plans to hold a conference call to discuss the Greek debt crisis, Japanese Finance Minister Naoto Kan said after concern that fiscal turmoil is spreading sparked a global stock-market rout. The G-7 members are the U.S., the U.K., Japan, France, Germany, Canada and Italy.
The European members “will probably explain” steps taken with the International Monetary Fund to assist Greece, Kan said today in Tokyo. “I don’t think we will be asked to take specific action, such as currency intervention.”
Kan’s comments sent the euro rising against the dollar after it hit a 14-month low yesterday and caused stocks in Asia to pare their losses. The G-7 call indicates that finance chiefs from the world’s most developed nations may see escalating risks to the global economic recovery little more than a year after the credit crisis faded.
Tamaki echoed Kan in signaling that no currency intervention would likely result from the G-7 call today, saying responsibility for managing Greece’s crisis rests primarily with the euro area and the IMF in their roles overseeing aid to the country.
“This is not a currency issue but a more fundamental issue of debt and structural reforms,” Tamaki said. The discussion is “by itself very useful” and “shows a kind of solidarity among the G-7,” he said. Tamaki, who is in St. Gallen for a conference, said he had not been informed about the details of the conference call, which he said will involve finance ministers and central bank chiefs.
A 110 billion-euro ($140 billion) rescue package for Greece from the European Union and the IMF on May 2 has failed to stem market concerns about the debt crisis spreading to high-deficit EU countries such as Portugal and Spain. The extra yield that investors demand to hold Spanish and Portuguese debt rose yesterday to the highest level since the euro’s inception in 1999.
The euro area and the IMF offered the loans to Greece in return for deeper budget cuts that prompted demonstrations this week in which three bank employees in Athens were killed when their office building was set on fire by protestors.
Prime Minister George Papandreou, forced to turn to the EU and the IMF after soaring borrowing costs cut Greece off from the markets, pledged 30 billion euros in wage and pension cuts and tax increases in the next three years to tame the deficit.
Today’s G-7 call comes before a meeting of EU leaders in Brussels this evening and a day after European Central Bank President Jean-Claude Trichet resisted taking any new steps to stem contagion. The euro region’s central bank kept its benchmark interest rate at 1 percent.
Trichet said yesterday that the ECB’s 22-member Governing Council didn’t discuss buying government debt and that Spain and Portugal don’t face the same challenges as Greece. Euro-area governments should instead intensify efforts to cut budget deficits, he said at a press conference in Lisbon.