PARIS (MNI) – European finance officials promised a “decisive”
solution to the two-year-old Eurozone debt crisis on Saturday as
European leaders prepared for a crucial meeting in Brussels on Oct. 23.

Following two days of talks here by finance ministers and central
bankers from the Group of 20 leading economies, Eurozone officials
said key elements of the solution had taken clear shape, while
not disclosing any major details.

“The results of Oct. 23 will be decisive,” French Finance
Minister Francois Baroin told a press conference following the meeting.
Germany’s Finance Minister, Wolfgang Schaeuble, vowed that Europe would
“bring a comprehensive package of measures” on Oct. 23.

By raising expectations that a solution is at hand, and can be
presented to G20 leaders at the Cannes summit in early November,
Eurozone officials are making a major bet that they can finally assuage
investor tensions that have roiled markets and slowed global economic
growth to a crawl. After previous summits at which solutions were
promised, markets have nearly always been disappointed.

G20 leaders gave cautious approval to the nascent Eurozone plan,
while saying the final details would be crucially important.

“We heard encouraging things from our European colleagues in Paris
about a new comprehensive plan to deal with the crisis on the
continent,” U.S. Treasury Secretary Timothy Geithner told reporters
following the meeting.

“The elements of this plan include a much more substantial
financial firewall to ensure that the governments of Europe can borrow
at sustainable interest rates as they reform, a broad recapitalization
of banks, further support for a sustainable program in Greece,” he said.

Geithner added, however, that European leaders “clearly have more
work to do on the strategy and the details.”

The G20 meeting broke up with no agreement on whether the
International Monetary Fund should have access to new resources to
battle the crisis. The United States and Germany clearly weighed in
against giving the fund new money, opposing talk that a way could be
found for emerging market nations like China and Brazil to supply funds,
via the IMF, to battle the crisis.

IMF Managing Director Christine Lagarde told a press conference
that the fund would propose that it be allowed to offer new short-term
instruments, called precautionary credit lines, that would allow it to
more rapidly come to the aid of countries in trouble.

The crucial issues to be dealt with at the Oct. 23 summit include
the shape of a new bailout package for Greece, recapitalizing European
banks and the leveraging of the European Financial Stability Facility,
Europe’s bailout fund. A decision must also be made on whether banks
should take greater losses on Greek debt than the 21% haircut decided at
the July 21 Brussels summit.

German officials at the meeting rejected the idea that the European
Central Bank could be involved in increasing the firepower of the EFSF.
Some officials at the meeting suggested that the EFSF could provide an
insurance backstop to European debt markets, agreeing to absorb initial
losses if countries ran into trouble.

In their final communique, G20 officials simply pledged “further
work to maximize the impact of the EFSF in order to avoid contagion.”

The finance officials also vowed “to take all necessary actions to
preserve the stability of banking systems and financial markets.” The
communique added that “we will ensure that banks are adequately
capitalized and have sufficient access to funding to deal with current
risks.”

By David Barwick, Steven K. Beckner, Jack Duffy, Peter Koh and
Johanna Treek.

— Paris newsroom, +331-42-71-55-40; paris@marketnews.com

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