Economic reform is key to euro’s survival

By PETER RANSCOMBE
Published on 19/07/2012 00:00

EUROZONE countries must speed up the pace of economic reforms and establish a banking union within the coming months to reassure markets, a European Central Bank (ECB) official yesterday warned.

Christian Noyer, governing council member of the ECB, said European Union (EU) governments had asked the European Commission to bring out a proposal in September.

Noyer, who is also governor of the French central bank, added: “We have got to put a banking union in place very quickly. We at the ECB and at the Bank of France are working on it this summer. It needs to be in place this autumn.

“We’ve got to have collective intervention capacities for all the eurozone banks in order to provide reassurance.”

Some Europe officials have suggested that setting up ECB-led banking supervision by the end of the year would not be possible and that it might not be until the middle of next year before it could be up and running.

Among the details to be worked out are precisely what powers the ECB will be given, whether big banks or all lenders will be covered and how to avoid conflicts of interest.

Once the supervisory body is in place, the eurozone’s rescue fund will be allowed to lend directly to banks, which leaders hope will break any links between troubled banks and sovereign borrowers.

Noyer’s comments came as the International Monetary Fund called for the ECB to take a bigger role in sorting out Europe’s debt crisis.