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World finance leaders demand quick action from EU on debt

28 January 2012, 20:35 CET
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World finance leaders demand quick action from EU on debt

Japanese Economics Minister Motohisa Furukawa - Furukawa - Photo World Economic Forum

(DAVOS) - Frustrated political and economic world leaders bashed the eurozone on Saturday for dragging its feet over its debt crisis, piling pressure on Brussels just ahead of a key EU summit.

Japanese Prime Minister Yoshihiko Noda, speaking through a video link to the World Economic Forum's annual meeting in Davos, branded the eurozone the "major source of risks for the global economy."

"Within the eurozone there should be major steps to alleviate the concerns of the international community and the markets," he said. "We ardently wish for the stabilisation of economies and finances in Europe."

His views were shared by other Asian leaders and by the heads of major international financial institutions.

"I've never been as scared as now," said Donald Tsang, Hong Kong's chief executive, whose four decades in public service spanned through other serious economic downturns such as the 1997 Asian financial crisis.

"You need decisive action, you need overkill. You need to inspire confidence," Tsang told Europe.

"That confidence must come from decisive action of governments working together and doing it quickly," he added, complaining that delays had already cost billions in unnecessarily mounting debt.

"Two months ago in Greece you can do with 20 percent haircut. Now even 50 percent is not easy, maybe 70 percent is needed. So do it quickly. You need resolution and you need decisiveness."

While previous crises, including Asia's, were largely contained within regions, the current inter-connected economic system carries a significant wider risk of contagion.

Japanese Economics Minister Motohisa Furukawa said: "With this in mind, we expect that Europe does its utmost to manage the challenges to establish a firewall to calm down the markets."

The Japanese minister also sought to distinguish Japan's high debt from that which is engulfing Europe, stressing that it was financed mainly domestically.

Therefore, "we don't think that this structure will cause an immediate crisis," he said, acknowledging nevertheless that tackling the country's debt is a "pressing challenge."

Canadian central banker and head of the international bank regulator the FSB Mark Carney said Europe not only has to take quick action but also take the right decision. "Get it right when you do something, do it right," he said.

Referring to talks between Greece and private creditors for banks to wipe off part of the Athens' debt, Carney said what is important is "that the size of the haircut ... has to lead to credible debt sustainability."

"It can't be just about meeting a number because the number was there before. And if that requires fuller participation from the public sector as well as the private sector, so be it," he said.

As the officials debated in Davos, the Greek government was in talks with private lenders on a 100 billion euro debt write-down designed to return the country to solvency and contain the problem.

Then on Monday, the leaders of the 27 EU member states -- including the 17 members of the eurozone -- were to meet in Brussels at a summit to agree details of their "fiscal compact" deficit-reduction plan.


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