|
FRANKFURT, Germany – The head of the European Central Bank warned Thursday that theeuro currency union is "unsustainable" without stronger politicaland financial ties, and called for a new course to save it from acrippling debt crisis. Mario Draghi heaped criticism on European political leaders forbeing slow to respond to the 2 -year crisis, saying delays andhalf-measures had only made the situation worse. Speaking to the European Parliament in Brussels, Draghi said thecentral bank has done what it could to fight the problems byreducing interest rates and giving $1.2 trillion ( 1 trillion) inemergency loans to banks. Now, he said, it is up to the 17 membercountries to devise a broad vision for the future. The ECB cannot "fill the vacuum of the lack of action by nationalgovernments," he said, urging sweeping reforms to spur growth,reduce deficits and create a Europe-wide banking regulator. Beyond that, the euro needs a fundamental reworking of its rulesand management, he said, calling the current structure"unsustainable unless further steps are taken." Europe's leaders need to "clarify what is the vision ... what isthe euro going to look like a certain number of years from now? Thesooner this has been specified, the better," said Draghi, aplain-speaking Italian and MIT-trained economist. "What we are saying is to dispel this fog." The blunt diagnosis from the ECB chief came as the eurozone entersanother tumultuous period of financial and political instability.Investors are worried that recession-hit Spain will be unable toprop up its banks burdened by toxic bad loans — and that itwill follow Greece, Portugal and Ireland in asking for aninternational bailout the eurozone can ill afford. These jittershave sent Spain's borrowing costs soaring and stock marketsplummeting. And in just over two weeks Greece returns to the polls with thereal possibility that it might elect a government that rejects theterms of its multibillion-dollar bailout. This could force thecountry out of the euro, irreparably fracturing the eurozone andfurther roiling markets. Perhaps the clearest sign of danger is the state of the euroitself: It is at a two-year low against the dollar, as investorspull money out of euro countries. Olli Rehn, the European Commission's top financial and monetaryaffairs officer, echoed Draghi by calling for a "long-term roadmap." He said there was "no easy fix" if EU leaders "want to avoidthe disintegration of the eurozone and instead make the eurosurvive and succeed for its member countries, and especially itscitizens." Italian Prime Minister Mario Monti, himself a Yale-trainedeconomist, added his voice to calls for an overhaul in the way theeurozone is managed. Speaking to an economic forum in Brussels onThursday, he warned his fellow EU leaders that they face a backlashat the polls if they do not stop the crisis of confidence fromspreading throughout the rest of the region. "I think Europe should accelerate its efforts in order to limit thecontagion, not simply because a huge financial contagion and crisiswould be a frightful event, but even more because this woulddismantle support for sustainable fiscal discipline," he said. Draghi's latest comments highlight the problems at the very heartof the eurozone. The euro was set up back in 1999 as a singlecurrency with a singe central bank, the ECB, to issue the currencyand set interest rates. But the different national governmentscontinued to set their own budgets and manage their widelydifferent economies. The currency union was unable to prevent somecountries from running up huge debts. And whereas recent measures such as the fiscal pact have helpedstrengthen rules against piling up too much debt, more wide-rangingmeasures — such as a common finance ministry or sharedborrowing through so-called eurobonds — have not foundagreement. Draghi told European Parliament leaders on Thursday that a firststep to solve these problems would be to impose tighter centralcontrol over banks. The banking industry has been a key part ofEurope's government debt crisis. Bailing out the banks is a hugeburden on financially shaky governments, and weak governmentfinances in turn hurt the banks that hold those governments' bonds. Most powers to regulate banks have been left with nationalauthorities, who have been seen as protective of their domesticfinancial services industries. The EU's regulator, the EuropeanBanking Authority, has limited ability to intervene. Draghi added his voice Thursday to calls for a central authoritythat could take over the burden of bailing out banks and also forcethem to overhaul their finances. The European Commission announcedplans for such a "banking union" on Wednesday. Bailouts for Bankia in Spain, and before that Dexia in Belgium,only highlight how reluctant national regulators are to admit theextent of troubles at home, Draghi said. That in turn has raisedthe end costs of rescuing the banks and undermining trust andtransparency, he said. "What Dexia shows — and Bankia shows as well — is thatwhenever we are confronted with the dramatic need to recapitalize,if you look back, the reaction of the national supervisors ... isto underestimate the problem, then come out with a firstassessment, a second, a third, fourth." "That is the worst possible way of doing things, because everybodyends up doing the right thing but at the highest possible cost andprice," Draghi said. Spain said last week that it would need to put $23.63 billion ( 19billion) into Bankia to rescue it from losses on real estate loans— money that investors worry Spain does not have. The companymade a successful stock market flotation only last year but hassince had to restate earnings and be taken over by the government. The e-commerce company in China offers quality products such as China Plastic Recycling Machines , Infrared Dryers Manufacturer, and more. For more , please visit Pet Strap Extrusion Line today!
Related Articles -
China Plastic Recycling Machines, Infrared Dryers Manufacturer,
|
