According to official at European Central Bank, there should be no self-satisfaction, despite the fact that debt crisis has loosen it grab on financial markets and banks.
Last Friday, the Central Bank representatives said that if governments could not put economies back to growth and fail to shrinks deficits, the crisis will dig deeper into the Euro Zone.
In the two previous Central Bank’s reports, it is highlighted that the European lawmakers have to develop new strategies or even institutions to protect the unified currency. One such strategy may be the introduction of gold-backed government nods. Italy, for example, has a large reserve of the yellow metal.
The Central Bank explains that major fiscal volatilities are still lurking over the area and relief is not yet to come.
The battle with financially instable banks, high levels of government debt and tepid economic growth continues further on in the Euro Zone. Spain and Italy are now more firm on economic level after the hard time of self-support over the summer of 2012. Though, Greece, Ireland and Portugal still cry out for government bailouts.
According the central bank report sensible mitigation of European fiscal durability looms in the area since this summer.
The President of European Central Bank said in July that all the needed measure would be taken in order to protect the euro. Bond markets got drastically better since that statement. The central bank introduced a strategy to purchase limitless amounts of government bonds in member countries, while lowering the borrowing rates. Though, the Vice President of European Central Bank was rather wary on the financial and economic issues progress of the Union.
The awaited improvement of European market status could ease the need of union members to improve growth and shrink debt and deficits. That way banks will be also threatened while they are struggling with their own finances. At the moment the banking system is separated on different threshold levels as the borrowing varies in some counties, despite they have the same common benchmarket interest rate announced by the central bank.
The positive outcome is that banks form financially unstable union members can tap bond markets. At the same the governments can benefit from lower borrowing rates.
The European Financial Minister bargained a new single central bank supervisor who would be under the protection of the European Central Bank. His role would be to watch if countries’ banks are not stepping over the line as their national regulations are taking defending measures. In respect, there would be less probability that governments will meet big costs from having to the banks out.
The single supervisor agreement is welcomed by a number of European Union leaders.
Yet, they are looking forward to new upcoming plans and major decisions to boost the unified currency.
The following move would be to establish a centralized authority that can restructure banks and force losses of bond holders.
Outlooks are unclear for other, more controversial suggestions like a central fiscal authority that would try to even out economic downturns across European countries, common borrowing, and EU-wide bank deposit insurance.