(Updates with comments to reporters in seventh and 11th paragraphs.)
Oct. 17 (Bloomberg) -- Canadian Finance Minister Jim Flaherty said that “time is running out” for European leaders to solve a debt crisis that has begun to spread.
Flaherty said European officials could have already provided a “definitive solution” to ease market concerns and delays have started to cause “extreme stress” in the continent’s banking sector.
“Quite frankly, Europe’s response over the past year has been disappointing,” Flaherty said in a speech today in Dublin to the Ireland Canada Business Association, two days after attending a meeting in Paris of finance ministers and central bankers from the Group of 20 countries.
“This is the world’s most immediate and pressing problem,” Flaherty said, according to a prepared copy of the speech provided by the minister’s office, and “is threatening to bring the world to the verge of another recession.”
Group of 20 finance ministers and central bankers concluded weekend talks in Paris endorsing parts of an emerging plan to avoid a Greek default, bolster banks and curb contagion. They set the Oct. 23 summit of European leaders in Brussels as the deadline for it to be delivered.
A German official today suggested those expectations won’t be met. German Chancellor Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Steffen Seibert, Merkel’s chief spokesman, said at a briefing in Berlin today. The search for an end to the crisis “surely extends well into next year.”
Flaherty told reporters after the speech he would be disappointed if European leaders failed to deliver a plan at the Oct. 23 meeting.
Flaherty said that while Europe has the resources to tackle the problem, it has allowed the situation to fester and put its banks in “jeopardy”, citing the need by France and Belgium this month to rescue Brussels-based lender Dexia SA.
“What will it take for Europe to take decisive action and put an end to this crisis, once and for all?” Flaherty said in today’s speech. “Too much time has been wasted, too many opportunities have been missed.”
Flaherty said the crisis can still be contained if European leaders show “true leadership” and take clear and concrete steps to resolve the crisis.
Those decisions must include whether to support Greece unequivocally or face the “natural consequences” of not supporting the country, Flaherty said. After the speech, he told reporters Europe risks a banking crisis if it doesn’t dedicate more funding or an “adequate restructuring” of Greek debt. Last month, Flaherty said Greece may have to leave the euro if the country failed to press ahead with its budget cutting plans.
“Half-measures are not an option,” Flaherty said, adding any decisions need to be clear in order to win the support of markets. “The lack of clarity in Europe’s plans so far has only exacerbated the ongoing instability.”
Flaherty said non-European G-20 countries also need to take steps to secure the global recovery, including the adoption of “medium-term” deficit reduction plans and flexible exchange rates.
--Editors: David Scanlan
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