PTI reported that ahead of the G 7 meeting in France later this week, the US has urged the European Union to take decisive action to prevent the further spread of the current economic crisis to other countries.

A Treasury Official told reporters that “For its part, Europe’s most important contribution will be to take decisive action to build a stronger firewall and prevent the further spread of the crisis to the larger European economies. The EU summit agreed on July 21 to provide the European Financial Stability Facility with additional flexibility and that represents a major step forward for Europe’s crisis response.”

He said that European efforts to provide liquidity to its banks and to recapitalise banks are also vitally important. He told “Europe needs to have the capacity to mobilize financing rapidly, efficiently and on a scale commensurate with the challenges of enhancing bank backstops, sustaining support for secondary market purchases and addressing the needs of large but vulnerable countries.”

He added “At the same time, Europe needs to ensure that the support can be deployed rapidly and without cumbersome, additional national approval mechanisms that could undermine the efficacy of these mechanisms.”

In the coming weeks, European leaders must implement those summit commitments in a way that shows markets that Europe will do what it takes to ensure that Spain, Italy and other large, vulnerable euro area sovereigns can borrow at sustainable rates.

(Sourced from PTI)