EU Commission's Roadmap for a 'Comprehensive Response' to Debt Crisis

The EU Commission finally presented its long-awaited roadmap on Wednesday outlining the comprehensive response the Commission feels is necessary in order to restore confidence in the Euro area and the European Union as a whole.

The Commission focused on five coordinated courses of action that need to be implemented. The reports also stressed that the actions should be taken as quickly as possible

• Decisive action on Greece – The commission notes that the action must include disbursement of the sixth tranche, a second adjustment program, based on adequate financing through public sector and private sector involvement and continued support from the Commission Task Force.
  
• Completing Euro area intervention – This includes implementing the decisions agreed upon at the July 21 meeting, maximizing the effectiveness of the EFSF, accelerating the launch of the European Stability Mechanism to mid 2012 and the provision of sufficient liquidity by the European Central Bank.
  
• A fully coordinated approach to strengthening Europe's banks – This includes recapitalization and the use of current market valuations for sovereign debt.
  
• Accelerating stability and growth-enhancing policies
  
• Building robust and integrated economic governance for the future

On the subject of bank recapitalization plans, EU President Barroso said Wednesday that in order to achieve the highest quality of capital, bank supervisors should temporarily use higher capital ratios. Barroso says a reassessment of banks capital needs by supervisors should be the basis for a fully coordinated European approach to bank recapitalizations .

As was reported earlier, Barroso said that if banks need to recapitalize, they should first use private sources of capital, then government support if necessary, and finally, in the event government support is unavailable, a loan from EFSF could be utilized.

Finally, President Barroso said Wednesday that the EU needs to reach an agreement on the plan forward at the European Council meeting scheduled for October 23rd.

 

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