Europe aims to beef up crisis fund
Sep 24, 2011, 11:40 a.m.
By David Lawder and Daniel Flynn
WASHINGTON (Reuters) - Europe is working on ways to boost the firepower of its bailout fund, a top European official said as the United States, China and other countries turned up pressure on the euro zone to contain its debt crisis.
Signs are growing that Europe is readying new measures to prevent fallout from Greece's near-bankruptcy from spreading to other euro zone countries, threatening the region's banks and hurting the world economy.
The European official said on Saturday the euro zone countries cannot boost the size of the 440 billion-euro fund, known as the EFSF, because Germany would not agree to such an increase.
"We need to find a mechanism where we can turn one euro in the EFSF into five, but there is no decision on how we could do that yet" the official said, speaking on condition of anonymity.
The United States and other countries have urged Europe to leverage up the European Financial Stability Facility, possibly by using funds from the European Central Bank.
In a statement, the International Monetary Fund's steering committee said the euro zone would do whatever was necessary to resolve the single currency bloc's sovereign debt crisis.
U.S. Treasury chief Timothy Geithner, in his most explicit warnings to date, said the ECB should take a more central role in fighting the crisis.
"The threat of cascading default, bank runs, and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally," Geithner told the IMF.
Financial markets have been wracked by fears the Greek debt crisis could overwhelm other euro zone countries and banks.
Investors took some comfort on Friday from signs of new resolve by European officials to bolster their defenses after nearly two years of what many see as half-hearted action.
Many policymakers now talk openly of possible Greek default and the need for Europe to move much more aggressively to cope with it.
"Decisions as to how to conclusively address the region's problems cannot wait until the crisis gets more severe," Geithner said.
His warning was echoed by China's central bank governor Zhou Xiaochuan, who urged quick action to bring greater financial stability to the European region.
"The sovereign debt crisis in the euro area needs to be resolved promptly to stabilize market confidence, and forceful and credible fiscal consolidation measures are needed in relevant economies to alleviate sovereign debt stress," Zhou told the IMF.
The semi-annual gathering of the IMF and World Bank is dominated by worry about the risk that Europe now poses to the rest of the world.
A default by Greece could cause a domino effect in other highly indebted euro zone countries, officials fear, putting at risk Europe's banking system given the size of holdings of debt issued by weak European nations.
Canada's central bank governor, Mark Carney, told Canadian radio that the euro area's bailout fund should be more than doubled to "the neighborhood of a trillion euros."
- Joint pain shouldn’t keep you from enjoying an active and rewarding lifestyle.
- Journeys By Train, a Tucson-based escorted deluxe travel company, will conduct special ...
- The world will never forget the day when four young men from ...
- Floyd and Linda Cotton have been doing a lot of new clothes ...