Bloomberg News

Portugal’s Cavaco Says ECB Must Do More to Fight Debt Crisis

October 12, 2011

(See {EXT4 <GO>} for more on the sovereign-debt crisis.)

Oct. 12 (Bloomberg) -- Portuguese President Anibal Cavaco Silva said the European Central Bank has to do more to end the sovereign-debt crisis that has stretched over two years.

“The exceptional situation of real emergency that we have reached requires more from the ECB,” Cavaco Silva said in a speech today in Florence, Italy. “A wider and more foreseeable intervention is necessary in the sovereign debt market of the solvent countries that face problems of liquidity, including the availability for an unlimited intervention in the secondary market. The threats to the euro zone do not recommend that we remain tied to restrictive interpretations of the regulations of the Economic and Monetary Union.”

The European Financial Stability Facility, or EFSF, must be strengthened, Cavaco Silva said at the European University Institute. The ECB and the EFSF’s operations must be tied to strict conditions to ensure that nations comply with budgetary and structural policies, he said, adding that European banks also must be recapitalized.

The resignations of former Bundesbank President Axel Weber and of Juergen Stark from the ECB’s Executive Board this year laid bare German opposition to the ECB’s program of buying the bonds of debt-strapped euro-area nations such as Greece and Italy. Current Bundesbank President Jens Weidmann also opposed restarting of the bond purchases in August as the debt crisis threatened to engulf Italy.

Portugal in April became the third euro-area country to seek a bailout after Greece and Ireland. It will receive 78 billion euros ($108 billion) under the agreement with the International Monetary Fund and the European Union. ECB President Jean-Claude Trichet on April 7 said the central bank “encouraged” Portugal to seek aid, adding that the country’s banks needed to reduce their reliance on ECB funding.

--Editors: Jeffrey Donovan, Andrew Davis

To contact the reporter on this story: Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editors responsible for this story: Tim Quinson at tquinson@bloomberg.net.


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