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EU told to be decisive in handling debt crisis
Source: Agencies |
September 23, 2011, Friday
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SEVEN world leaders demanded Europe take more decisive action against its debt crisis, and a European Central Bank study warned yesterday that the entire euro currency project was now in peril.
As ministers gathered in Washington for meetings of the Group of 20 and International Monetary Fund, an open letter to G20 president France from the leaders of Australia, Canada, Indonesia, Britain, Mexico, South Africa and South Korea stressed the threat of the eurozone crisis spreading worldwide.
"Eurozone governments and institutions must act swiftly to resolve the euro crisis and all European economies must confront the debt overhang to prevent contagion to the wider global economy," the seven leaders wrote.
"The eurozone must look at all possible options to ensure long-term stability in the world's second-largest international currency."
The ECB study, perhaps the most strongly-worded warning about the future of the euro by a central banker, was a parting shot from the central bank's ECB chief economist Juergen Stark, who resigned this month after he opposed the bank's policy of buying the bonds of troubled countries.
"Greatly increased fiscal imbalances in the euro area as a whole and the dire situation in individual member countries risk undermining stability, growth and employment, as well as the sustainability of EMU (Economic and Monetary Union) itself," said the research paper, which was published by the ECB but not endorsed by it.
The study co-authored by Stark recommended that eurozone countries face tough new debt rules, have their deficits approved at a European level and if they reneged, should face automatic fines.
More urgent is the need to bolster Europe's banks and enable new powers for the eurozone's bailout fund given that many economists expect Greece to be unable to avoid default indefinitely.
The European Union's new super-watchdog, the European Systemic Risk Board, warned that the knock-on effects of the debt crisis that began in Greece in 2009 had led to considerably higher risks of financial instability in Europe.
As ministers gathered in Washington for meetings of the Group of 20 and International Monetary Fund, an open letter to G20 president France from the leaders of Australia, Canada, Indonesia, Britain, Mexico, South Africa and South Korea stressed the threat of the eurozone crisis spreading worldwide.
"Eurozone governments and institutions must act swiftly to resolve the euro crisis and all European economies must confront the debt overhang to prevent contagion to the wider global economy," the seven leaders wrote.
"The eurozone must look at all possible options to ensure long-term stability in the world's second-largest international currency."
The ECB study, perhaps the most strongly-worded warning about the future of the euro by a central banker, was a parting shot from the central bank's ECB chief economist Juergen Stark, who resigned this month after he opposed the bank's policy of buying the bonds of troubled countries.
"Greatly increased fiscal imbalances in the euro area as a whole and the dire situation in individual member countries risk undermining stability, growth and employment, as well as the sustainability of EMU (Economic and Monetary Union) itself," said the research paper, which was published by the ECB but not endorsed by it.
The study co-authored by Stark recommended that eurozone countries face tough new debt rules, have their deficits approved at a European level and if they reneged, should face automatic fines.
More urgent is the need to bolster Europe's banks and enable new powers for the eurozone's bailout fund given that many economists expect Greece to be unable to avoid default indefinitely.
The European Union's new super-watchdog, the European Systemic Risk Board, warned that the knock-on effects of the debt crisis that began in Greece in 2009 had led to considerably higher risks of financial instability in Europe.
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