June 4, 2012 / 1:23 PM / in 5 years

G7 ministers to discuss Europe crisis Tuesday

TORONTO/TOKYO (Reuters) - Finance ministers and central bank governors of the Group of Seven (G7) industrialized nations will hold a conference call on Tuesday morning, a Canadian government spokeswoman said on Monday, amid increased concern about the European debt crisis.

“There’s a heightened sense of alarm over developments in Europe, particularly in Spain,” said one G7 source, speaking on condition of anonymity due to the sensitivity of the matter.

However, he said that with U.S. unwillingness to provide International Monetary Fund money to help Europe, there was little sense the global community could act as one to contain the crisis.

Canadian Finance Minister Jim Flaherty, asked whether the crisis was an issue for the Group of 20 (G20), told reporters in Toronto: “I’ve been having discussions and I will have more discussions tomorrow morning and subsequently with my G7 colleagues.”

He added: “Those discussions also take place with some of the non-European members of the G20 ... who are concerned around the world outside of the euro zone with the potential consequences of a crisis in the euro zone, particularly a banking crisis.”

Flaherty spokeswoman Mary Ann Dewey-Plante clarified that no ministerial talks were scheduled so far for Tuesday of the G20, which includes the G7 as well as China, India, Russia, Brazil and other emerging and developed nations.

The G7 source said there was concern about whether there would be a bank run in Spain that could have repercussions beyond the euro zone.

A senior Brazilian government official said the debate over fiscal restraint versus stimulus would be prominent in any G20 talks.

“We insist on our position that European countries which have enough space to stimulate the economy, even via fiscal stimulus..., should do it now,” said the official, who will be at the June 18-19 summit in Mexico.

The Brazilian recognized that not many countries had fiscal room to add stimulus, and was referring mostly to Germany.

On Monday, financial markets were rattled by the deepening problems in the euro zone, as well as by recent disappointing U.S. jobs data and weak Chinese manufacturing figures, all of which spurred more concern about the global growth outlook.

Flaherty said Canada’s economy was in relatively good shape compared with other industrialized nations, although he noted that employment data has been “a bit bumpy” in recent months, and that Canada could be hit by Europe’s troubles.

“The real concern right now is Europe of course - the weakness in some of the banks in Europe, the fact they’re undercapitalized, the fact the other European countries in the euro zone have not taken sufficient action yet to address those issues of undercapitalization of banks and building an adequate firewall,” he told reporters.

Additional reporting by Randall Palmer, Louise Egan and David Ljunggren in Ottawa and Alonso Soto in Brasilia; Editing by Jeffrey Hodgson

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