Barroso tells central bankers to get tough in battle to beat debt crisis
War chest of new European Stability Mechanism
EUROPEAN Commission president Jose Barroso called for the faster creation of a permanent rescue fund and appealed to central bankers to use their powers as the ultimate line of defence against the debt crisis.
Due to be set up in mid-2013, the permanent fund, known as the European Stability Mechanism, will wield a €500bn war chest that could be used more flexibly than the current guarantee-based interim backstop and will include provisions for managing a sovereign default.
"We should do everything possible to accelerate the entry into force of the ESM," Mr Barroso told the European Parliament in Strasbourg yesterday.
He warned that the debt crisis had reached a "serious" stage and ruled out any chance of Greece leaving the euro.
Coming amid global criticism of Europe's crisis response, Mr Barroso's speech marked an effort to wrest powers away from the euro area's 17 national governments.
Offering an array of remedies, Mr Barroso called for a financial-transaction tax that could raise €57bn annually, said he would press ahead with proposals for common bonds and urged the scrapping of the unanimity rule in European Union decision-making.
As political leaders mull Greece's next loan and an improved rescue framework, Mr Barroso pointed to the European Central Bank as the institution best equipped to fend off speculators in the interim.
The ECB needs to "do whatever is necessary to ensure the integrity of the euro area and to ensure its financial stability," Mr Barroso said.
Efforts to shore up Europe's finances moved ahead yesterday with the parliament's passage of a six-part legislative package that stiffens sanctions on countries with runaway budget deficits and toughens the monitoring of boom-bust cycles.
Policymakers are weighing how to go further, identifying the euro-area finance ministers as the weakest link in the system. How to strengthen it will be discussed at a summit in Brussels in little over two weeks.
Apart from rhetorical support for Greece, at the epicentre of the debt crisis, Mr Barroso gave no indication whether the country would qualify for the next €8bn loan disbursement next month. A decision will be made at an extra October meeting of finance ministers that was announced yesterday.
Experts from the commission, the ECB and the IMF will return to Athens today to assess the latest round of Greek budget cuts.
Mr Barroso said work was progressing on ways to make the "most efficient" use of the €440bn temporary rescue fund, set to be endowed with additional powers by mid-October.
Nine of the 17 euro countries (including Ireland) have ratified the upgrade of the temporary fund, the European Financial Stability Facility. The vote in Germany, Europe's anchor economy, is due tonight.
Mr Barroso touted the proposed financial transaction tax as the price banks must pay for the €4.6trillion in aid and guarantees offered by European governments since the outbreak of the financial crisis in 2008.
"It is time for the financial sector to make a contribution back to society," he said.