Chicago - US President Barack Obama urged Europe on Monday to strengthen
its defences against financial market turmoil and recapitalise its
banks as part of a four-pronged strategy for tackling the euro zone
European leaders have shown an increased resolve to
address these issues, and there is a "consensus across the board" from
France, Germany and other European countries, Obama said in remarks that
suggest Europe is considering broadening its approach to resolving the
euro zone's sovereign debt crisis.
"I do sense greater urgency
now than perhaps existed two years ago or two and a half years ago,"
Obama said at a news conference to wrap up four days of G8/Nato
World leaders are growing increasingly alarmed that the
budget austerity approach favoured by Germany threatens to drive Greece
from the euro zone and deepen Spain's bank problems, which could
trigger a global financial crisis and tip the world back into recession.
For Obama, that could cost him re-election in November.
was joined by British and French officials over the weekend in calling
for bolder action ahead of a crucial meeting of European Union leaders
on Wednesday first called to discuss adding a growth plan to their
Prospects for growth
remarks point to a four-pronged approach that would encompass financial,
economic, fiscal and monetary measures to address the euro zone crisis
that he said were embraced by leaders who attended a G8 summit in
Maryland and the Nato sessions in his home town of Chicago.
got to put in place firewalls that ensure that countries outside of
Greece that are doing the right thing aren't harmed just because markets
are skittish and nervous," Obama said.
"We've got to make sure
that banks are recapitalised in Europe so that investors have
confidence. And we've got to make sure that there is a growth strategy
to go alongside the need for fiscal discipline, as well as a monetary
policy that is promoting the capacity of countries like a Spain or an
Italy to put in place very tough targets and some very tough policies,"
These measures would offer the people in the affected
countries the prospect for economic growth, jobs and growing incomes,
British Prime Minister David Cameron sent a similarly
urgent plea to European leaders for firm action, noting that 40% of
British exports go to the euro zone.
"The truth is we still
haven't done enough to decisively resolve the crisis," Cameron told a
news conference during a Nato summit. He also said that bank
recapitalisation, firewalls and a more active policy from the European
Central Bank were needed, as well future plans for a common euro zone
Injection of funds
International bankers also are pressing European leaders in private meetings for quick action.
Institute of International Finance (IIF), a global association of
financial institutions, estimates total credit exposure to Greece at
$460bn of which $70bn is to private sector investors, mostly in Germany
and France. The private sector exposure to Spain is much larger.
"There has to be concrete progress to stabilise market conditions," said Hung Tran, IIF deputy managing director.
the least, the IIF said it would like to see direct injection of EU
bailout funds into under-capitalised banks - an issue that could be
discussed at the EU dinner this week.
Germany has resisted the
idea, partly because it would require new rules for its bailout monies
and make bank risk an EU responsibility while regulation remains
primarily at the national level. But France and Italy are advocates.
issue that needs addressing is bank deposit insurance, Tran said. One
proposal is for the EU to offer an umbrella backup to national deposit
insurance schemes. This could prevent a bank run if a sovereign
government runs into financing problems. But he said recapitalisation is
Spain reported last
week that bad loans in its banks have risen to their highest in 18
years, underscoring problems the government faces as independent
auditors begin looking at the depth of the problem in its banking
sector. The size of bad loans has raised questions over how Spain could
afford to help recapitalise its banks.
French President Francois
Hollande has said he will push a proposal for mutualising European debt
at the informal summit of EU leaders in Brussels this week.
would be one way to help out deeply indebted countries like Spain,
Italy and Greece. But it increases pressure on German Chancellor Angela
Merkel to drop her opposition to the idea.