February 26, 2012
A meeting of G20 finance ministers began in Mexico City on Saturday with a series of warnings that Europe must do more to build its “firewall” against financial contagion.
“We still have to build the mother of all firewalls,” said Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development. “The more credible it is and the bigger it is, the less likelihood we will have to use it.”
G20 countries are demanding that eurozone members increase the size of the European Stability Mechanism, the permanent fund that would support Italy or Spain if they became unable to borrow, before they will consider increased resources for the International Monetary Fund.
As a result, expectations for a big policy outcome at this G20 meeting are close to zero, with some finance ministers staying on the ground in Mexico City for less than 24 hours. Mr Gurría said that creation of Europe’s firewall was already six months or a year too late.
“Every day the cost of the uncertainty and the cost of indecision is enormous,” he said. “I’d say Europe is making quite good progress in convincing the world that they are not going to allow a catastrophic financial failure on the continent,” said Tim Geithner, the US Treasury secretary. “Now, they are not done.”