EU’s Barroso Says Time to Rethink Eurozone Rescue Plans
The head of the European Commission on Thursday urged national leaders to re-think the euro's financial defenses, after admitting debt contagion has now spread beyond the Eurozone periphery.
Jose Manuel Barroso urged in a letter to the 27 European Union leaders "a rapid re-assessment of all elements related to the EFSF (European Financial Stability Facility) and concomitantly the ESM (European Stability Mechanism)."
"It is clear that we are no longer managing a crisis just in the euro-area periphery," he warned
A July 21 deal by leaders of the 17 states sharing the euro on a second bailout for Greece has failed to prevent sharply higher debt-risk premiums for Italy and Spain, the currency area's third- and fourth-largest economies.
Asked what elements of the EFSF or ESM Barroso wanted re-assessed, commission spokeswoman Karolina Kottova said "all elements might well include size as well" as well as the "flexibilisation" of the 440-billion-euro EFSF and the 750-billion-euro ESM that will replace it post-2013.
"Whatever the factors behind the lack of success, it is clear that we are no longer managing a crisis just in the euro-area periphery," Barroso said.
He said the July 21 agreements giving the EFSF the possibility of "precautionary use, recapitalization of banks and intervention in secondary bond markets, are not having their intended effect on the markets."
He attributed market pressure on euro states to slow global growth and U.S. debt problems as well as to "first and foremost, the undisciplined communication and the complexity and incompleteness of the July 21 package."
There is, he said, "growing skepticism among investors about the systemic capacity of the euro area to respond to the evolving crisis."
Source: Agence France Presse
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