Nov. 9 (Bloomberg) -- Europe must speed up construction of a “firewall” to protect countries that have sound policies, the U.S. Treasury’s top international official said.
“The task ahead now for Europe is to accelerate elaboration and implementation of the firewall,” Lael Brainard, Treasury undersecretary for international affairs, said in a speech in Washington today. “Euro-area commitment and euro-area resources will be central to the credibility and effectiveness of this endeavor.”
Italian Prime Minister Silvio Berlusconi’s offer to resign yesterday triggered questions about who will lead the nation, while Greek Prime Minister George Papandreou’s talks on forming an interim government dragged into a third day. Italian bonds tumbled, pushing two-, five-, 10- and 30-year yields to euro-era records.
U.K. Prime Minister David Cameron said today that euro-zone leaders “urgently need to put flesh on the bones, to put figures on the size of that firewall to stop this contagion going any further,” Cameron said. “Countries falling out of the euro could be very painful for our economy.”
Brainard said Europe had planned a firewall “to ensure that euro-area countries with basically sound policies continue to have access to market financing.”
With demand in advanced economies “expected to remain weak, the emerging markets have a vital role to play in strengthening global growth as they pivot to more domestic-led demand,” she said.
--Editors: Kevin Costelloe, Christopher Wellisz
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