G-20 Sets One Week Deadline For Plan, Markets Respond Favourably

Markets across Europe this morning are reacting positively to comments and deadlines given at the G-20 conference held over the weekend. The STOXX 50 (+1.32%), FTSE 100 (+0.96%) and DAX (+1.66%) are rallying as market sentiment has improved and investors speculate the Eurozone may come out of the crisis sooner and stronger than previously anticipated.

Finance ministers from the Group of 20 richest countries and Eurozone have reached a consensus to schedule October 23rd as the deadline for the delivery of a comprehensive action plan to address the current challenges being faced in the Eurozone.

To shed more light on the plan a communiqué issued by the finance ministers of the respective countries stated, “This action plan will encompass a set of measures to address immediate vulnerabilities and strengthen the foundations for a strong, sustainable and balanced growth whereby: – Advanced economies, taking into account different national circumstances, will adopt policies to build confidence and support growth.”

The plan which has yet to be made public includes a potential write down of 50% of Grecian bonds, and boosting the coffers of the $611 billion intervention fund called the European Financial Stability Facility (EFSF).
Secretary of the US Treasury, Timothy Geithner endorsed the plan stating it has “the right elements”, but conceding that more details on the strategy needed to be disclosed.

There is still mystery surrounding how political leaders expect bankers to endorse a plan that will see them losing up to 50% of the value of their Grecian security holdings, however negotiations are still being held. Other variations of the ‘plan” include a radical suggestion for bankers and investors to exchange their Greece debt for new securities at a lower value but collateralized by the AAA rated rescue fund-the EFSF.