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Oct. 11 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said Europe’s debt crisis now threatens the region’s financial system as officials race to put together a new plan to end the turmoil.
“The crisis has reached a systemic dimension,” Trichet told lawmakers in Brussels today in his capacity as head of the European Systemic Risk Board. “Sovereign stress has moved from smaller economies to some of the larger countries. The crisis is systemic and must be tackled decisively.”
European leaders are trying to shore up the region’s banks as they debate how best to manage the fallout from any Greek default. Governments yesterday pushed back a summit amid opposition to Germany’s drive for deeper-than-planned Greek bond writedowns that Luxembourg’s Jean-Claude Juncker says may exceed 60 percent.
Germany and France, Europe’s dominant tandem, this week pledged a crisis-management breakthrough by early November.
“Time is always of the essence when you have to be in a mode of crisis management,” said Trichet.
Officials are also debating how to magnify the firepower of the euro region’s bailout plan, with ECB Vice President Vitor Constancio signalling yesterday that it should be done using government guarantees rather than the central bank’s market operations.
“We don’t consider it appropriate for us to leverage the EFSF,” said Trichet today, stressing that the comment was in his capacity as ECB president.
--Editors: John Fraher, Craig Stirling
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