Central banks move to boost financial system

Thursday 01 December 2011 10.38
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Central banks making it cheaper for banks to get US dollar liquidity
Central banks making it cheaper for banks to get US dollar liquidity
Kenny says the ECB must help provide a 'firewall' for at-risk countries
Kenny says the ECB must help provide a 'firewall' for at-risk countries

Central banks around the world, including the European Central Bank, have announced they are taking coordinated action to ease strains on the financial system.

The ECB, US Federal Reserve, the Bank of England and the central banks of Canada, Japan and Switzerland are all taking part.

The ECB said in a statement the banks are making it cheaper for banks to get US dollar liquidity when they need it, starting next Monday.

They are also taking steps to ensure banks can get ready money in any currency if market conditions warrant.

European shares soared after the announcement.

The Taoiseach said it is absolutely essential that EU leaders make and implement clear decisions quickly to safeguard the euro.

Speaking at the Financial Services Annual Dinner in Dublin tonight, Enda Kenny also said the ECB needs to be able to play a larger role.

He said the EU had to deploy overwhelming firepower and the ECB had a credible role to play.

Mr Kenny said the Government supports stronger economic governance throughout Europe and the eurozone.

He said he understood that Herman Van Rompuy would suggest limited treaty change at the EU Council meeting next week.

Mr Kenny said this would require considerable and rational discussion.

Earlier, the Taoiseach told the Dáil that the answer to the eurozone crisis now lies with the support of the ECB.

Mr Kenny said the ECB must be involved in providing a "firewall" for countries where contagion exists.

He said the problem has to be dealt with quickly and politically.

Mr Kenny also said the 1.6% growth rate remains the target of the Government ahead of next week's Budget and the figure was ''not one that we are changing''.

Fianna Fáil leader Micheál Martin said major global companies are engaging in planning scenarios in case of a eurozone crash.

He asked if the Government has contingency plans if such an event was to arise.

Independent TD Shane Ross said the Taoiseach is surrendering to German Chancellor Angela Merkel and French President Nicolas Sarkozy.

Mr Ross called on the Taoiseach not to become embroiled in a fiscal union debate and surrender Ireland's independence, which was "temporarily sacrificed" by the previous Government.

'Systemic crisis'

Earlier, European Council President Herman Van Rompuy said the debt crisis in Europe is now fully systemic and will require a systemic response to resolve it.

In a speech to a conference of EU ambassadors he said Europe was ''witnessing a full-blown confidence crisis".

"Some may blame it on the irrationality of the market. But it's a fact and we need to confront it," he said.

He said dramatic steps had been taken by eurozone leaders over the past 18 months to try to contain the crisis, but it was not enough.

"Today we are getting to the core of the matter. It is this: the systemic crisis needs a systemic answer. We need a significant step forward towards a real economic union commensurate with our monetary union."

That call mirrors signals from Germany and France that they want to move much more quickly and with more determination towards a fuller fiscal union in the 17 eurozone countries via a change of the EU treaty.

However, such a step will require sacrifices on the part of member countries, Mr Van Rompuy said.

"Regardless of whether there will be treaty change or not: both entail a sacrifice of sovereignty in exchange for providing the economic and monetary union with a structural credibility," he said.