G20 pledges bank support, eyes bolder euro fund
By Jan Strupczewski and Daniel Flynn
WASHINGTON (Reuters) - The world's major economies on Thursday pledged to prevent Europe's debt crisis from undermining banks and financial markets, and said the euro zone's rescue fund could be bolstered.
Under pressure from investors to show action, finance ministers and central bankers from the Group of 20 economies said they would take all steps needed to calm the global financial system.
"We commit to take all necessary actions to preserve the stability of banking systems and financial markets as required," the group, including the United States and China, said in a communique after a dinner meeting on Thursday.
Shares of several European banks have tumbled and funding costs have risen as investors worried about bank exposure to debt issued by Greece and other debt-heavy European countries.
World stocks slumped on Thursday to their lowest level in 13 months, hurt by the risk of a new U.S. recession and weaker economic data from China as well as Europe's debt problems.
But the pledge of action from the G2O gave a lift to the euro in early trade on Friday, while softening stock losses in Asia. U.S. stock futures pointed to a higher open in New York.
In a sign the euro zone was working on adding to the potency of its 440 billion-euro financial rescue fund, the G20 statement said the bloc's members would implement "actions to increase the flexibility of the EFSF and to maximize its impact" by the group's next ministerial meeting in October.
No details were given of how the EFSF might be altered, although French Finance Minister Francois Baroin used the word "leverage" in comments to reporters. Continued...