European ministers said to have told G7 they'll act to contain debt crisis

OTTAWA – An emergency conference call of G7 officials to discuss Europe’s worsening debt crisis has drawn vows of action from the continent’s representatives, according to reports from some capitals.

But there were few details and Canadian Finance Minister Jim Flaherty, who participated in the high-level call, along with Bank of Canada governor Mark Carney, would not take questions on the issue.

Reports of progress came mostly from Tokyo and Washington, which characterized European finance ministers on the call as aware of the need for action to calm markets.

Japan’s finance chief Jun Azumi was quoted in Jiji Press that the European members pledged to “speed up their efforts” to contain the crisis.

Meanwhile, White House press secretary Jay Carney said the European leaders were moving with a “heightened sense of the urgency” to the unfolding crisis, particularly over vulnerable European banks.

“We’re hoping to see accelerated European action over the next several weeks, including in the run-up to the aforementioned G20 leaders meeting in Mexico” on June 18-19, he said.

Canada and the U.S. have long advocated for Europe to “overwhelm” the problem with a massive bailout package, similar to the one Washington created after 2008, to stabilize the banking system and back-stop sovereign debt.

But Flaherty would reveal little Tuesday afternoon about whether he sees any progress, saying only that discussions had been “thorough” and “lengthy.”

His office released a statement that provided few details about what leaders around the world agree is becoming a spiralling problem serious enough to threaten the global recovery.

“The G7 counterparts reviewed developments in the global economy and financial markets and the policy response under consideration, including the progress towards financial and fiscal union in Europe,” a statement from the minister’s office read.

The conference call also included officials from Germany, France, Italy and Britain. Members did not issue a communique.

As recently as Monday, Canada’s finance minister expressed consternation with the deepening crisis in Europe — and lack of response from European governments.

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

Still, Flaherty said he remained opposed to beefing up reserves at the International Monetary Fund to help out Europe, arguing that the continent has sufficient funds to do the job.

On Tuesday, Spain’s finance minister sent out a distress call via a radio interview appealing to European leaders to come to the rescue of his nation’s banks, because international financial markets had closed the door on his government.

The interest rate on Spain’s benchmark 10-year bond rate hovered around 6.3 per cent on Tuesday, close to the levels that pushed Greece, Ireland and Portugal to ask for bailouts in recent years.

Banco Santander head Emilo Botin estimated the cost of shoring up Spain’s troubled banks would be about 40 billion euros, or about $52 billion.

“The figure is not that high, the figure is not excessive but the question is where the money would come from,” Cristobal Montoro, the finance minister, told Spain’s Onda Cero radio.

Meanwhile, the odds have risen that Greece may need to leave the eurozone, which would have hard to predict consequences both for the continent’s monetary union and private sector banks that have loaned Greece funds.

In an announcement keeping low interest rates in place Tuesday morning, the Bank of Canada warned the European crisis had escalated and was posing a risk to the world economy.

“This is leading to a sharp deterioration in global financial conditions,” the bank said.