Euro zone crisis grave threat to global economy: India PM

Cannes, Nov 5 (PTI) Eurozone crisis is a potentially grave threat to stability of global economy, India's Prime Minister Dr Manmohan Singh has said. But he has also made it clear that management of the crisis is primarily the responsibility of the European countries. "The crisis in the Eurozone is a potentially grave threat to the stability. There was obviously too little time in the Summit to resolve all the issues," Prime Minister Manmohan Singh said in his press conference at the end of the G-20 Summit here on Friday. He said India has a "vested interest" in smooth functioning of the Eurozone, which must have a centralised institution that can act as a "lender of last resort" in times of crisis. Singh suggested an institutional mechanism which can act as a "lender of last resort". The Prime Minister said that the European Central Bank at present is not allowed to lend directly. The Heads of 20 most influential economies deliberated for two days in the midst of the worsening European crisis triggered by the increasing threat of default by sovereign members of the Eurozone like Greece. "...Global economy has weakened particularly in advanced economies leaving unemployment at unacceptable levels.... "Tensions in the financial markets have increased due mostly to sovereign risks in Europe; there are also clear signs of slowing in growth in emerging markets," the Communique issued after the Summit said. As regards the Greece crisis, the G20 leaders have agreed to straighten the global financial safety nets and support the IMF in putting forward to Precautionary and Liquidity Line (PLL) to provide liquidity assistance to countries. "We also support the IMF in putting forward a single facility to fulfill the emergency assistance needs of its members. We call on the IMF to expeditiously discuss and finalise proposals," the Communique said, without making any firm commitments for bailing out the debt-ridden Greece. The Communique, however, underlined the need for expeditiously implementing the quota and governance reforms of the IMF. The Summit, however, said that it has made progress in reforming the IMF to make it more representative, stable, and resilient. "We have agreed on actions and principles that will help to reap the benefits from financial integration and increase the resilience against volatile capital flows," it added. The G20 leaders also reaffirmed their commitment to move towards "more market determined" exchange rate systems and enhance flexibility to reflect economic fundamentals of the concerned countries. The Communique also asked the G20 nations to refrain from competitive devaluation of their currencies. The Prime Minister added, "It's in our interest that Eurozone should get its act together and present a credible picture of resolving tensions that have arisen." PTI "EU is India's largest trading partner. If Europe is in a crisis, it affects us in many ways -- it slows down imports and technology flows. We have a stake in the orderly function of the European market. If the financial system is not in a good shape, capital flows will be affected." PTI