EU ministers are considering ways of re-capitalising financial institutions after agreeing that further additional measures were needed to shore up the region’s banks.
According to the FT, EU ministers meeting in Luxemburg believe enough has not been done to convince financial markets that European banks could withstand the current debt crisis.
European Commissioner for economic affairs Olli Rehn says: “There is an increasingly shared view that we need a concerted, co-ordinated approach in Europe while many of the elements are done in the member states.”
“There is a sense of urgency among ministers and we need to move on. Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty.”
Banks in Germany, France and Belgium hold tens of billions of euros in sovereign bonds from struggling eurozone countries and have subsequently ran into difficulty amid fears that Greece may be set to default.
Markets been hit hard already this week with most European markets following markedly. The FTSE 100 closed 2.6 per cent down on Tuesday to stand at 4944.44, although it has rallied this morning. There were also concerns over Franco-Belgian bank Dexia, which has seen its share price plummet after worries it was overly exposed to Greek and Italian bonds.
German finance minister Wolfgang Schauble announced the country could reactivate support mechanisms it put in place to recapitalise the banks in 2008. These have since expired and Schauble said they could be re-introduced amid concerns that developments in financial markets could escalate into a banking crisis.