Japan's financial chiefs expressed optimism on Friday that Europe was heading towards a solution to the region's debt crisis, despite deep divisions between France and Germany over how to strengthen the euro zone bailout fund.
Finance Minister Jun Azumi said he expected Europe to come up with a convincing scheme to tackle its debt woes before a Group of 20 summit in early November, while Bank of Japan Governor Masaaki Shirakawa said Europe's response had already helped ease market tension.
France and Germany said in a joint statement on Thursday that European leaders would discuss a global solution to the crisis on Sunday but that no decisions would be adopted before a second meeting to be held by Wednesday at the latest. "I take it positively that they put off a decision a little as this shows they are serious about bringing the matter to a conclusion," Azumi told reporters after a Cabinet meeting.
"I see no change in the broad movement towards a resolution (to the debt crisis), and I firmly believe that Europe will come up with a scheme that is convincing to markets and other countries before (the G20 summit in) Cannes." The major sticking point is over how to scale up the European Financial Stability Facility (EFSF), a 440 billion euro fund so far used to bail out Portugal and Ireland.
France and Germany disagree over the best way to bolster the facility, with Paris fearing its triple-A credit rating could come under threat if the wrong method is chosen. Failure to agree on leveraging the EFSF will further damage confidence in the euro zone's ability to tackle its debt crisis.
"The fate of Europe's sovereign debt problems is going to be the focus for the time being with regard to avoiding risks to the global economy," Shirakawa said in a speech at a meeting of credit unions. "As European authorities are responding to this problem, tension in markets seems to have eased somewhat. But it is imperative for Europe to steadily implement further measures to reform public finances and stabilise the financial system, in order to gain market trust."
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