Eurozone needs to do more

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Eurozone needs to do more

Eurozone needs to do more

Monday, December 19, 2011
  • mar
Draghi -- "Eurozone countries must speed up steps to build firewall against contagion."

BRUSSELS: New ECB chief Mario Draghi warned that the bank cannot carry the full weight of solving the eurozone debt crisis and urged euro finance ministers to do more to restore confidence later Monday.

 

In an interview ahead of a 1500 GMT tele-conference, aimed at spelling out commitments to a 200-billion-euro (RM832 billion) IMF bailout for troubled euro economies, the European Central Bank chief urged eurozone nations to speed up steps to tighten fiscal discipline and build a firewall against contagion.

 

Asked if the ECB could step in and act as a US-style lender of last resort, Draghi told The Financial Times:

"The important thing is to restore the trust of the people -- citizens as well as investors -- in our continent."

 

"We won't achieve that by destroying the credibility of the ECB."

 

The Italian, who will speak before the European Parliament's economics committee in Brussels on Monday afternoon, said the key first step for ministers was to make their existing bailout fund, the European Financial Stability Facility (EFSF), more effective.

 

"I think that if one can show its usefulness in its present size, the argument for its enlargement would be much stronger," he said of the 440-billion-euro fund, almost half of which is already allocated.

 

At the December 9 summit, which saw Britain block plans for EU treaty change to save the currency, eurozone leaders in tandem with wider EU counterparts also announced plans to pump 200 billion euros into an IMF war-chest.

 

Eurozone members were to provide about three quarters, and other EU countries the rest.

 

The aim was to allow the Washington-based institution to come to the aid of eurozone countries in trouble, and the summit gave leaders 10 days to work out the details.

 

Last Friday, Fitch ratings agency expressed doubt that the budget discipline pact would solve the debt crisis and warned it might soon downgrade six countries, including Spain and Italy.

 

The pact, to be drafted and signed by March, will also be on the agenda of talks Monday.

 

In Europe, several countries have agreed to contribute to the IMF, with Belgium promising 9.5 billion euros, Denmark 5.4 billion euros and Sweden 11 billion euros.

 

But non-euro country Britain has refused to take part.

 

"We did not agree any increase in bilateral resources last week. We made very clear in that meeting that we were not contributing to that 200 billion euros," a spokesman for Prime Minister David Cameron said Friday.

 

In Germany, central bank governor Jens Weidmann has said a quota of up to 45 billion euros is available there, provided there is fair burden-sharing among IMF members.

 

"But if large members, for example the US, were to say 'we're not taking part,' then from our point of view it is problematic," he said last week.

 

A key intermediary said Friday that EU states had failed to create a dynamic among outside backers, with only Russia tentatively, and with conditions, suggesting it could contribute up to $20 billion in loans and investments.

 

Nations such as China, India and Brazil have yet to go that far.

 

France, Italy and Spain, each of whom have faced extra pressure on bond markets, are sure to deliver a share, but have yet to communicate. The Dutch have yet to confirm their share, as has Finland.

 

Non-euro Poland, the sixth-largest EU state which has targeted 2015 for switching to the currency, will contribute.

 

Another influential non-euro country, Sweden, is preparing an 11-billion-euro loan, a spokesman for its central bank told AFP.