Euro crisis needs ‘mother of all firewalls,’ OECD warns
Keeping the Eurozone financially stable amid “daunting” challenges will require a bailout fund of at least 1 trillion euros, or $1.3 trillion -- “the mother of all firewalls” -- the head of the Organization for Economic Cooperation and Development said Tuesday.
OECD Secretary-General Angel Gurria said the 17-country bloc that uses the euro is “not out of the woods” despite signs of steadiness in the financial markets and the smooth restructuring of the Greek debt.
Speaking in advance of a scheduled Friday meeting of European finance ministers in Copenhagen, Gurria said the currency collaborative needs a “credible” rescue fund at the ready in order to ensure market confidence and a full recovery in the struggling region.
The current $664-billion commitments to the buffer funds won’t do the trick, he said while revealing two economic surveys in Brussels. Olli Rehn, European commissioner for economic and monetary affairs, stood beside him.
“We still cannot draw too much comfort from these signs of healing,” Gurria said. “How many times have we seen conditions ease only for the crisis to return?”
Debt levels in Europe remain high amid a backdrop of frail banks, austerity programs, high unemployment and weak consumer and investor confidence. Some nations’ risk spreads are at unsustainable levels and “have showed signs of creeping up in the last few days,” Gurria said.
A bigger bailout fund would give governments the breathing room to focus on jump-starting growth and competitiveness, he said.
The OECD also recommended a suite of reforms that would shake up product markets, tax systems, education programs as well as national regulations that the group said currently limit cross-border economic activity, including worker migration.
But Gurria may have to settle for a compromise. On Monday, Germany -- a creditor country -- indicated that it would back a firewall of 700 billion euros, or $929 billion.
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