Eurozone needs ‘mother of firewalls’ to halt crisis

The debt-wracked eurozone needs to build “the mother of all firewalls” to prevent the crisis spreading throughout the bloc, the head of the Organisation for Economic Cooperation and Development (OECD) said on Saturday, ahead of a crunch G20 meeting.

“We still have to build the mother of all firewalls,” Angel Gurria, Secretary General of the OECD, told bankers ahead of the gathering of top ministers and central bankers.

“To be strong, we have to have a thick firewall, a tall firewall, a wide firewall, a very big firewall that is credible. Therefore, the more credible it is and the bigger it is, the less likelihood we will have to use it,” he said.

However, he said it was “frankly six months late, a year late.”

The issue of bolstering the eurozone’s defences against the crisis is set to dominate the G20 meeting and an EU leaders’ summit on March 1 and 2.

US Treasury Secretary Timothy Geithner on Friday used similar language to Gurria’s, saying Europe must build a “credible” firewall that is “bigger than they have today”.

Delay is costly
The International Monetary Fund and the United States, among others, have called on the eurozone to combine its current bailout fund, the European Financial Stability Facility (EFSF), with its permanent European Stability Mechanism (ESM) pot that is due to come into effect in July.

The EFSF started with 440-billion euros but now has around 250-illion after bailouts of Ireland, Greece and Portugal. The ESM has a maximum lending capacity of 500-illion euros.

Combining the two would therefore give a war chest of around 750-billion euros.

Gurria warned that delay was costly.

“Every day, the cost of the uncertainty and the cost of indecision is enormous. Every day, the attempt to substitute real resources with another summit and another speech, it just gets more and more expensive,” he cautioned.

“You can’t accuse Europe of being too fast.” –AFP

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