Barroso outlines plan to resolve eurozone debt crisis

 

Jose Manuel Barroso says there needs to be "more discipline" in Europe

The president of the European Commission, Jose Manuel Barroso, has set out a plan designed to bring an end to the eurozone debt crisis.

In a speech, Mr Barroso said banks must set aside more assets to help guard against future losses.
Banks supported by the eurozone bailout fund - the European Financial Stability Facility - should be stopped from paying dividends or bonuses, he said.
The commission called it a "comprehensive response" to the crisis.
It outlined five areas of action "designed to break the vicious circle between doubts over the sustainability of sovereign debt, the stability of the banking system and the European Union's growth prospects".
Mr Barroso said the plan "charts Europe's way out of the economic crisis".
"Reactive and piecemeal responses to different aspects of the crisis are no longer sufficient," he said.
The plan calls for five policy actions:

• Decisive action on Greece so that "all doubt is removed" about the country's economic sustainability. This includes freeing up the latest tranche of bailout funds
• Implementing measures agreed in July, which include increasing the size of the EFSF to 440bn euros ($607bn; £385bn) and accelerating the launch of its permanent successor, the European Stability Mechanism
• Co-ordinated action on strengthening Europe's banks. Banks should set aside more assets to cover losses through private funding or national governments if necessary. If this is still not adequate, they can tap into the EFSF, but if they do they will not be allowed to pay dividends of bonuses
• Speeding up policies to enhance growth and stability, such as free trade agreements
• Building greater integration for economic governance across the eurozone.

Greek losses Late on Tuesday, Slovakia voted against increasing the powers of the EFSF - the only one of the 17 members of the eurozone to do so.
However, internal political wrangling was behind the no vote, and observers expect a fresh vote before the end of this week.
In addition to expanding the EFSF's powers, the measures agreed in July by eurozone leaders also included private lenders taking a 21% hit on loans to the Greek government.
However, investors now believe both these measures are inadequate. They are calling for the bailout fund to be increased towards 2 trillion euros, and believe private investors will be forced to take a much bigger hit than the 21% suggested.
The leaders also agreed in July to a second bailout package for Greece worth 109bn euros.
The commission, along with the International Monetary Fund and the European Central Bank, has been in Athens deciding whether to release the latest tranche of funds from the first bailout agreed in 2010.
On Tuesday, the three bodies agreed measures that Greece needs to take to bring down its debt levels and said they were likely to release the 8bn euros that country needs to pay its bills.
Leaders have been heavily criticised, particularly by investors, for not taking decisive action to end the crisis.
However, there is feeling now that such action will be forthcoming, analysts say, with all eyes on a summit of EU leaders on 23 October and a G20 meeting in Cannes at the beginning of November.