GROUP of Seven finance chiefs vowed to support banks and buoy slowing economic growth as Europe’s debt crisis roiled financial markets and threatened a global recession.
“We will take all necessary actions to ensure the resilience of banking systems and financial markets,” G-7 finance ministers and central bankers said in a statement released during weekend talks in Marseille, France.
“Concerns over the pace and future of the recovery underscore the need for a concerted effort at a global level in support of strong, sustainable and balanced growth.” Renewed fears that European policy makers are failing to prevent a Greek default and contain their debt woes last week prompted investors to sell stocks and push the euro to a six- month low against the dollar.
European bank and sovereign credit risk reached all-time highs as 10-year Treasury and German bund yields fell to record lows on demand for a haven.
Germany moved toward insulating its banks against the fallout of a possible Greek default and Juergen Stark’s resignation from the European Central Bank exposed the policy rifts aggravating the debt turmoil.
BNP Paribas, Societe Generale SA and Credit Agricole, France’s largest banks by market value, may have their credit ratings cut by Moody’s Investors Service as soon as this week because of their Greek holdings, two people with knowledge of the matter have said.
Such shifts highlight the biggest risk to international expansion and financial market stability since the collapse of Lehman Brothers Holdings Inc. three years ago this month.