G7 to hold emergency eurozone talks

Finance chiefs of the Group of Seven leading industrialised powers are to hold emergency talks on the eurozone debt crisis, in a sign of heightened global alarm about strains in the 17-nation European currency area.

With Greece, Ireland and Portugal all under international bailout programmes, financial markets are anxious about the risks from a seething Spanish banking crisis and a June 17 Greek election that may lead to Athens leaving the eurozone.

Jim Flaherty, the Canadian finance minister, said ministers and central bankers of the United States, Canada, Japan, Britain, Germany, France and Italy would hold a special conference call on Tuesday, raising pressure on the Europeans to act.

“The real concern right now is Europe of course – the weakness in some of the banks in Europe, the fact they’re undercapitalised, the fact the other European countries in the euro zone have not taken sufficient action yet to address those issues of undercapitalisation of banks and building an adequate firewall,” Flaherty told reporters.

“Markets remain skeptical that the measures taken thus far are sufficient to secure the recovery in Europe and remove the risk that the crisis will deepen. So we obviously believe that more steps need to be taken,” Jay Carney, the White House press secretary, told reporters.

Confidential teleconference

The disclosure of the normally confidential teleconference came as European Union paymaster Germany said it was up to Spain, the latest eurozone country in the markets’ firing line, to decide if it needed financial assistance, after media reports that Berlin was pressing Madrid to request aid.

German Chancellor Angela Merkel and leaders of her centre-right coalition said in a statement: “All the instruments are available to guarantee the safety of banks in the euro zone.”

They effectively ruled out Spanish calls to allow eurozone rescue funds to lend money directly to recapitalise Spanish banks, which are weighed down with bad property debts, without the government having to take a bailout programme.

Berlin is pressing reluctant eurozone partners, including close ally France, to agree to give up more fiscal sovereignty as part of a closer European fiscal union.