The finance ministers of the world’s 20 biggest economies are gathering in Paris to try to resolve the European debt crisis that is threatening to push the world’s economies into another recession.
The financial chiefs meeting Friday and Saturday are expected to consider several options that some leaders say could help stabilize the weeks-long turmoil in global financial markets and ease the debts of financially troubled Greece.
Some leaders have suggested that Greece’s debts need to be substantially cut, effectively a default on its obligations. That could force investors holding Greek debt to assume much bigger losses than the 21 percent figure they already agreed to in approving a second Greek bailout in July, possibly to as much as 60 percent.
In addition, other European leaders are pressing the continent’s banks to sharply increase their cash reserves to cover possible losses on the debt they hold from Greece and other countries faced with burgeoning debt. Some think the lending capacity of the International Monetary Fund should be increased.
But there appears to be no immediate consensus on what plans the finance ministers should present to a scheduled October 23 summit of European leaders, or the subsequent G20 summit of world leaders in early November.
The urgency of the debt talks was underscored Thursday, as Standard and Poor’s lowered Spain’s long-term credit rating because of its weak economy and concern over bad bank loans. Spain has Europe’s fourth largest economy.
S&P downgraded Spain’s rating one notch . The rating change means it will likely cost Spain more to borrow money to finance its government operations. The Fitch rating agency also downgraded Spain’s credit rating last week.
On Thursday, Fitch downgraded Swiss-based bank UBS and put other European and U.S. banks on negative watches amid concerns about the fragility of the global economy.
Earlier, Fitch cut its ratings for two British banks, Lloyds Banking Group and Royal Bank of Scotland, citing the reduced likelihood of further government support.
