Euro crisis pressure mounts

AS the euro crisis threatened to become a political one last night, the EU came under severe pressure from countries worldwide concerned that they are being dragged under by the failures to protect the single currency.

There is growing consensus that the solution is to empower the ECB to buy up sovereign bonds in a big way and allow the rescue fund, the EFSF, to directly recapitalise EU banks.

But both of these suggestions are staunchly opposed by Germany and the ECB.

Finance Minister Michael Noonan was insistent that greater ECB support was essential, not just when money is made available through a beefed up EFSF, but would continue to be available in parallel to support countries availing of EU funds.

However, this issue did not appear to be on the table at yesterday’s finance ministers’ meeting in Brussels which concentrated on a financial transaction tax, which has only some support from member states.

The political crisis in Greece and Italy appeared to transfix the ministers and they were resigned to waiting for technical experts to make judgments later this month on two highly complex methods to leverage the rescue fund to €1 trillion creating the bazooka they seem to believe will frighten off speculators.

But warnings that effective action needed to be taken quickly came from a number of sources, including Mark Carney, head of the Bank of Canada, who has just been appointed head of the global Financial Stability Board.

Regions such as Asia that depend on funds from European banks are becoming increasingly concerned that the crisis in the euro, together with demands for more banks to retain more capital, will dry up funds, affecting growth and imports.