GEORGE OSBORNE, Britain’s chancellor, has urged Europe to “put its own house in order”, calling on euro zone countries to decisively underpin the euro and finally sort out the banking system. Mr Osborne, writing in the Financial Times, says Europe has not been bold enough in its response to its currency and banking problems, leaving a shadow hanging over recovery.
The chancellor calls on Europe to restore confidence by tackling deficits and adopting supply-side measures to boost growth, but he says euro zone members must also agree a “comprehensive package” early this year to restore confidence in the euro. “The sense of crisis may have eased, but wide spreads and high market interest rates still stalk several European economies,” he writes, ahead of an economic conference in Paris.
Mr Osborne shares the concerns of former prime minister Gordon Brown that European countries have failed to follow the UK’s lead by ensuring banks were properly capitalised.
He argues the International Monetary Fund or other external bodies should be brought in to bring credibility to stress tests for European banks, after the last exercise was shown to be badly flawed. The stress tests, in July, in which 84 of the 91 banks scrutinised – including Bank of Ireland and Allied Irish Banks – received a passing grade have been widely discredited, amid lingering concerns about banks’ exposure to other struggling European economies.
“It is revealing that the tests conducted last July identified a capital shortfall of just €3.5 billion yet less than six months later Irish banks alone required 10 times that amount,” Mr Osborne writes.
“That is why the UK has already gone much further with tougher stress tests and now has banks that are among the best capitalised in the world.”– (Copyright The Financial Times Limited 2011)
