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The 17 nations sharing the euro face a permanent risk of contagion from the region’s debt crisis and European Union leaders are tackling the difficulties faced by Spain’s banks, said Italian Prime Minister Mario Monti.
“As far as the problem of the banks is concerned, I am aware that everything is being followed very, very closely and in close cooperation with the EU institutions and the Spanish government,” Monti said at a conference on U.S.-Italian relations in Venice yesterday. “I am fully confident that this issue is being promptly and adequately dealt with.”
Spain risks becoming the fourth euro region nation to need aid after Greece, Ireland and Portugal sought bailouts. Spain’s banks may require as much as 100 billion euros ($125 billion) in capital to cover bad loans and assets stemming from the collapse of the country’s real estate markets, Fitch Ratings estimates.
Monti said that until European leaders adopt more pro- growth policies, all countries will be under threat. He called on his European partners to complete a pro-growth package of measures no later than the June 28-29 EU summit in Brussels.
“There is a permanent risk of contagion, contagion from Greece, from other countries,” he said. “That is why strengthening the euro zone is of such a collective interest.”
The region’s existing bailout funds should be sufficient to defend nations that are struggling to finance their debts, Monti said.
The funds set aside and the mechanisms created to contain the financial crisis “are not negligible and will be effective if needed,” the prime minister said.
Fiat SpA Chief Executive Officer Sergio Marchionne, speaking at the same conference, said that a breakup of the single currency is “possible.”
“We keep on hearing drastic messages” from southern European countries, Marchionne said. “I think someone had better do something before we get to the point of no return.”
To contact the reporters on this story: Andrew Davis in Madrid at firstname.lastname@example.org
To contact the editor responsible for this story: James Hertling at email@example.com