Action plan to stem eurozone crisis is unveiled

AN ACTION plan to bring an end to the debt crisis gripping eurozone countries such as Greece, Italy and Ireland has been unveiled by the president of the European Commission, Jose Manuel Barroso.

Mr Barroso said the plan “charts Europe’s way out of the economic crisis” as he warned that “reactive and piecemeal responses are no longer sufficient”.

He also said banks supported by the eurozone bailout fund – the European Financial Stability Facility (EFSF) – should be stopped from paying dividends or bonuses and must set aside more assets to help guard against future losses.

The EC called Mr Barroso’s package a “comprehensive response” to the crisis, amid fears that mounting debts threaten to throw the 17-nation eurozone into a new recession.

Mr Barroso also said banks and financial institutions must start holding more cash so they are more resilient in the face of the sovereign debt crisis and to prevent market turmoil. The package was announced after Greece learned it will gain more bailout cash – €8 billion (£7bn) – after a decision by debt inspectors from the European Union, International Monetary Fund and European Central Bank.

Mr Barroso’s five-point plan includes decisive action over Greek debt levels, so that “all doubt is removed” about Greece’s economic sustainability. The move includes measures to free up bailout funds for the debt-ravaged country.

The eurozone will also implement measures agreed in July which include increasing the size of the EFSF to €440bn, taking co-ordinated action on strengthening Europe’s banks, speeding up policies to enhance growth and stability such as free trade agreements and introducing greater economic governance across the member nations.

Mr Barroso said: “Reactive and piecemeal responses to different aspects of the crisis are no longer sufficient. This plan charts Europe’s way out of the economic crisis.

“The commission has just adopted a road map to stability and growth. And we have set out concrete terms and timelines to implement it.”

A spokesman for Mr Barroso said it will be up to the national banking supervisors, together with the European Banking Authority, to define when the higher capital ratios have to be attained, how long they have to remain elevated and set the precise ratio. Mr Barroso also called for more powers for the EU’s monetary affairs commissioner, which would give him more influence over national budgets.

All eyes are now on a summit of EU leaders on 23 October and a G20 meeting in November.

The proposals to recapitalise Europe’s banks come as Slovakia faces pressure to hold a new vote on the eurozone rescue fund, after politicians rejected EU proposals in a move that brought down the government.