Europe finance chiefs defend crisis action

Europe's finance chiefs defended their approach in addressing the debt crisis as pressure built from markets and other regions to take action to prevent it from snowballing. With the US and eurozone debt and deficit crisis overhanging the IMF-World Bank annual meeting in Washington, top European officials sought to assure that they had a firm hand on matters and that the rescue of Greece, ground zero of the crisis, was moving ahead. French Finance Minister Francois Baroin said the July 21 plan of new money for Greece and to broaden the scope of the emergency European Financial Stability Facility had already put into place the steps needed to stabilize the eurozone. "On this agreement, we are hand in hand with Germany to implement the July 21 agreement, not to move away from this strategy," he said. European Central Bank president Jean-Claude Trichet stressed that the situation as a whole was "very, very difference from perception." "We are not in denial at all," he added. "We have a global crisis of the creditworthness of sovereigns and we are the epicenter of this crisis." Deutsche Bundesbank president Jens Weidmann said the situation was "much better than the sentiment" and suggested that a new recession was "unlikely." German Finance Minister Wolfgang Schaeuble fended off criticism from Washington and elsewhere about EU indecisiveness in the face of possible public debt defaults and the fracturing of the eurozone. "We in Europe are generally on the right path, especially we in Germany," he said. The comments followed a surprise late-night statement from the Group of 20 leading economies aimed at calming markets after Thursday's global rout in equities on worries of looming recessions in the United States, Europe and Japan. "We... are committed to a strong and coordinated international response to address the renewed challenges facing the global economy," the G20 finance chiefs said. "We are taking strong actions to maintain financial stability, restore confidence and support growth." But pressure over the issue continued Friday, with IMF managing director Christine Lagarde and the fund's European affairs chief repeating warnings of the need for a coordinated response in Europe that restores confidence to markets. "We're at the point now where decisive action needs to take place, and needs to take place very, very soon. It has to be concerted action, it has to be collective," said Antonio Borges, director of the IMF's European department. Developing countries at the meetings also expressed worries that their economies would be hit badly if the advanced countries could not reverse the crisis. Borges urged Athens to follow through on austerity conditions to the 110-billion-euro ($148 billion) rescue package from the IMF and the EU in order to get an eight-billion-euro ($11 billion) disbursement in order for it to keep paying its bills. "The problem is to a very large extent, is how can we restore confidence," he said. "There is an element of market fear which, to a very large extent, we consider is excessive... We have to stop that before it becomes overwhelming." Schaeuble rejected calls for Germany, together with France the leaders in addressing the debt crisis rumbling through Europe, to allow for more flexibility for the indebted countries to deficit-spend so that growth is not cut off. "It's more important to combat the real causes for the crisis... high deficits," he said. "It's very clear that you cannot combat the crisis by amplifying the causes." He stressed that a second rescue loan and debt restructuring package for Greece agreed in principle on July 21 was on course to be approved by EU governments within a few weeks. It is crucial now to implement the July plan "with great seriousness," Schaeuble said. Otherwise, "it does not make any sense to speculate on the next steps." He insisted Germany's approach enjoyed a "broad consensus" at Thursday's G20 working dinner. Meanwhile markets continued to harbor doubts about European action, with slight, rocky rebounds in stocks in Europe and the United States on Friday in the wake of Thursday's sharp plunges. Analysts said the G20 statement underwhelmed. "The market is worried about the European situation and that the officials are moving too slow in terms of their action of getting things under control," said Scott Marcouiller of Wells Fargo Advisors. "It's fear and uncertainty, the two things that the markets hate the most; it is continuing to dominate the marketplace."