The lack of confidence in international governments to address the issues underlying current economic turbulence is a "serious malaise", the chancellor George Osborne has claimed. In an article for the Financial Times, co-authored by other finance ministers from around the world, Osborne said they believed the biggest barriers to economic recovery were political, not economic and they called for "political leadership and courage" and for the eurozone to take further steps to reassure markets. "The eurozone has taken steps to deal with the problems of contagion via an enhanced role for the European financial stability facility, and the European Central Bank's purchases of sovereign bonds. Now it needs to demonstrate commitment to greater fiscal integration and governance arrangements that avoid moral hazard and entrench fiscal responsibility," they said. But they are demanding action to be taken on the amount of credit that banks store: "Greater political resolve is also needed to strengthen bank balance sheets on a sustainable basis." The call comes as the president of the World Bank warned that stock markets were entering a "new danger zone" in a scathing critique of economic leadership in the US and Europe. Robert Zoellick said the global economy was going through a multispeed recovery with western economies stuck in the slow lane following the downgrading of US government debt and the ongoing crisis in the eurozone.
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Monday, August 15, 2011
The lack of confidence in international governments to address the issues underlying current economic turbulence is a "serious malaise", the chancellor George Osborne has claimed. In an article for the Financial Times, co-authored by other finance ministers from around the world, Osborne said they believed the biggest barriers to economic recovery were political, not economic and they called for "political leadership and courage" and for the eurozone to take further steps to reassure markets. "The eurozone has taken steps to deal with the problems of contagion via an enhanced role for the European financial stability facility, and the European Central Bank's purchases of sovereign bonds. Now it needs to demonstrate commitment to greater fiscal integration and governance arrangements that avoid moral hazard and entrench fiscal responsibility," they said. But they are demanding action to be taken on the amount of credit that banks store: "Greater political resolve is also needed to strengthen bank balance sheets on a sustainable basis." The call comes as the president of the World Bank warned that stock markets were entering a "new danger zone" in a scathing critique of economic leadership in the US and Europe. Robert Zoellick said the global economy was going through a multispeed recovery with western economies stuck in the slow lane following the downgrading of US government debt and the ongoing crisis in the eurozone.
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Zoellick spoke at the Asia Society in Sydney, Australia, on the eve of a summit between French president Nicolas Sarkozy and German chancellor Angela Merkel that will attempt to forge a co-ordinated path out of the eurozone crisis. Fears over sovereign debt burdens spread to France last week as destabilising rumours spread that the country might join the US in suffering the previously unthinkable punishment of losing its AAA rating, which threatens to raise the state's borrowing costs.
Chancellor George Osborne hinted that he shared Zoellick's concerns when he admitted that closer fiscal union, perhaps driven by the issue of eurobonds underwritten by the 17 single currency members, might be the only solution to the crisis. Asked on BBC Radio 4 if the only answer for the eurozone was some form of fiscal union, he said: "The short answer is yes."
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