Euro-area leaders at the Group of 20 summit pledged to “take all necessary policy measures” to defend the currency union and boost protection of the region’s struggling banks, according to the final statement issued at a meeting in Mexico.
With contagion from the debt crisis rippling through the world economy, participants at the G-20 summit in the beach resort of Los Cabos backed measures to spur growth and cut budgets in Europe while saying the U.S. will “calibrate” the pace of its spending cuts to avoid a “sharp fiscal contraction” in 2013.
At the end of the two-day summit, the leaders of advanced and emerging economies said Europe is taking steps toward closer economic union “that lead to sustainable borrowing costs.” The G-20 also backed Europe’s plans to move toward a more integrated banking industry.
Talks among G-20 leaders at Los Cabos were dominated by the crisis in 17-nation euro region and its threat to the world economy. Bond yields in Spain, the region’s fourth-biggest economy, rose to a euro-era record yesterday, above the 7 percent level that led to bailouts in Greece, Ireland and Portugal.
The group welcomed the plan to rescue Spain’s banks and the European Union’s efforts to build up its crisis defenses, including the European Stability Mechanism, the region’s permanent bailout fund scheduled to start up in July.
G-20 leaders backed the euro area’s “intention to consider” steps toward what policy makers are calling a banking union, including “banking supervision, resolution and recapitalization, and deposit insurance.” Those proposals will probably be discussed at the next EU summit on June 28 and 29 in Brussels.
Faced with Spain’s banking crisis and speculation that the country’s may need a sovereign bailout, euro-area leaders agreed to “break the feedback loop between sovereigns and banks,” the G-20 said in the statement.
“Against the background of renewed market tensions, euro area members of the G20 will take all necessary measures to safeguard the integrity and stability of the area.”
Bridging a policy gap between Germany and France, EU countries in the G-20 agreed to “move forward expeditiously” to promote economic growth “while maintaining the firm commitment to implement fiscal consolidation,” according to the statement.