Former Taoiseach John Bruton has said the European Central Bank should follow the example of the US Federal Reserve and the Bank of England and act as a lender of last resort if the financial crisis is to be brought to a close.
In a speech to a meeting of local authorities from Northern Ireland and the Republic, Mr Bruton said that the ECB needs to put liquidity into the market by buying government bonds from banks.
This would effectively mean printing money and that in the long run this would lead to a build-up of inflationary pressures.
However, he said that if the ECB does not exercise wide discretion now, there will be no long run for the European economy.
Mr Bruton also called for the creation of a eurobond as a longer term measure to heal the crisis.
It would raise money for governments at cheaper rates, but would also act as a disciplinary measure that would force governments to stick to budgetary rules.
The euro bond would be guaranteed by all 17 eurozone states, and it could have first call on a fixed share of VAT receipts to assure markets it would be repaid.
Such a measure would require changes to the EU treaties, which would require a referendum in Ireland.
Mr Bruton said the banking problem has to be cleared up by creating conditions in which banks would no longer be too big to fail.
He said this could be done by having a proper system of European banking supervision, a Europe-wide retail banking market and a Europe-wide deposit guarantee scheme.
In such a context no bank, would be too big to fail, which would remove the problem of taxpayers being called on to support insolvent banks.
He also said a eurozone-wide system is needed to remedy economic imbalances such as excess private borrowing, excess government borrowing, and excessive surpluses by exporting countries.
