During the second day of the G20 summit Eurozone leaders, Barack Obama and ECB, IMF and EU officials tried to reach an agreement on the way to boost IMF's firepower. As the ECB is reluctant to continue its massive purchases of the indebted countries' bonds, emphasizing that it is not “a lender of last resort”, EU officials turned to the IMF as an institution which could step in, in case a larger Eurozone economy required a bailout. No agreement has been reached in this respect however, as none of the G20 countries expressed their willingness to participate in boosting IMF resources.

Kathy Lien, Director of Currency Research for GFT sees this as another failure as far as restoring market confidence is concerned: “Talks of IMF involvement in providing additional support to vulnerable economies appears to have broken down at the G20 meeting which isn't good news for the market because it implies that the G20's attempt to calm the investors have failed.

G20 leaders agreed however that IMF together with the EU should exercise quarterly supervision of the Italian economy and the progress in the implementation of reforms necessary to reduce debt. EC inspectors will visit Rome already next week to evaluate the current situation.

The inability of G20 leaders to arrive at a consensus on increasing IMF resources caused stocks, the euro and Italian bonds to drop. The Stoxx Europe 600 Index fell 0.6% while the euro edged down 0.4% to $1.3763 and 10-year Italian bond yields increased 13bps.

The situation of Greece and the possibility of its leaving the Eurozone was another hot topic during today's talks. The president of the EC José Manuel Barroso assured that the EU will support Greece's efforts to stay in the Eurozone if Athens commits to carrying out all the required reforms. On Friday evening Greek PM George Papandreou will face a confidence vote in his government, the aim of which according to Finance Minister Evangelos Venizelos is "to seek and achieve the broadest possible consensus and co-operation for the benefit of the country, with the creation of an equivalent government."