The United States and other non-European members of the Group of 20 economies should keep up pressure on Europe to deal with its debt crisis, Finance Minister Jim Flaherty said Thursday.
"It is important that we and the United States as well, and the other non-European G20 countries continue to exert pressure on the euro zone countries to deal with this matter because it can have unfortunate consequences for the global economy," he told reporters ahead of the June 18-19 G20 summit in Mexico.
Mr. Flaherty declined to join a specific call made by the United States, France, Italy and Spain for a Europe-wide system to guarantee bank deposits, something German Chancellor Angela Merkel has rejected.
"The pressure that we have exerted, and it's been for some months now, has been to encourage the European countries to step up to the plate with very substantial resources to overwhelm the crisis," he said. "There are various ways that that can be done, and it's not for us to be prescriptive, to tell the Europeans how to accomplish the goal."
Canada has opposed giving money to the International Monetary Fund to bail Europe out, saying the euro zone had some of the wealthiest countries in the world, but Flaherty said he did see a traditional role for the IMF in assisting in the implementation and monitoring of fiscal plans.
Separately, G20 officials told Reuters, central banks from major economies stand ready to take steps to stabilize financial markets and prevent a credit squeeze should the outcome of Greek elections on Sunday cause tumultuous trading.
A senior U.S. official cautioned the Greek election will not provide "the definitive signal on what happens next" in the euro zone debt crisis.
But if severe market strains emerge after an unusual confluence of three elections this weekend - there are important polls in Egypt and France as well - central bankers are on standby to ensure enough cash is flowing through the financial system.
"The central banks are preparing for coordinated action to provide liquidity," said a senior G20 aide familiar with discussions among international financial diplomats. His statement was confirmed by several other G20 officials.
It could mark a dramatic backdrop to the G20 summit of world leaders who will gather in Los Cabos, Mexico, on Monday and Tuesday, where Europe's escalating crisis tops the agenda.
Leaders will be accompanied by finance ministers playing an advisory role. The ministers, who usually keep a low profile at these summits, have scheduled a working dinner on Monday and lunch on Tuesday.
Depending on the severity of the market response, an emergency meeting of ministers from the Group of Seven developed nations could be held on Monday or Tuesday in Los Cabos, with central bankers joining by phone, a second G20 official said.
Their first line of defense probably would be a statement that policy makers are ready to take whatever steps are needed to assure market stability.
This usually is a signal for technical steps to keep cash flowing through the financial system. Currency swap lines already are in place which can be drawn upon to ensure there are enough dollars available if global investors rush into the safety of U.S. assets. Central banks also can hold extra auctions to flood banks with short-term cash via repurchase agreements.