Markets stutter as draft eurozone rescue plan takes shape
By politics.co.uk staff
A draft plan to tackle the European debt crisis will not be formally agreed until November's G20 summit, it has emerged.
Talks in Washington between G20 finance ministers and officials from the World Bank and International Monetary Fund (IMF) this weekend saw tentative agreement reached on the rough shape of the package.
This would involve 50% of Greece's debt being written off and an increase in the size of the European financial stability facility to two trillion euros, as well as the recapitalisation of large European banks.
Yesterday the IMF said eurozone countries would take whatever steps are necessary to deal with the current crisis.
Its communiqué stated: "Our circumstances vary, but our economies and financial systems are closely interlinked.
"We will therefore act collectively to restore confidence and financial stability, and rekindle global growth."
The FTSE 100 index slipped again by nearly two per cent after the weekend's talks, as traders appeared to demand action rather than words from financial leaders.
It is not yet clear whether the draft plan will prove effective.
Private investors in Greek debt are unlikely to accept just 50 per cent of their liabilities being repaid. Banks within the eurozone could oppose further recapitalisation.
Extending the EFSF would involve increasing its facility from the current 440 billion euros by up to four times.
This week EU and IMF officials will be inspecting the success of the Greek deficit reduction plan.
They will assess whether it has implemented agreed spending cuts before deciding on whether to extend a further eight billion euros of bailed-out funds that Greece requires to avoid a default on its debts.
