European Central Banks (ECB) General Market Operations director has detailed the six factors that are needed, but not alone sufficient, to get Europe out of crisis. Governance and bank recapitalisation are key concerns.
Speaking in a personal capacity at last weeks International Capital Market Associations (ICMA) conference, Francesco Papadia said that individual countries of the euro area must maintain or regain some macro economic conditions.
The ECB members second point was that the heterogeneity in macro economics between north and south Europe must be surpassed as soon as possible.
Third, he believed Euro zone governance must protect the euro area through adequate fire walls.
Firewalls must be used to prevent against shocks not against bad policies, he said.
Papadia said that the Euro zone must also enforce the EUs economic component, especially as regards governance. He conceded, however, that progress had been made in this regard on institutions and the substantial strengthening of the governance of the euro area.
There was also need for a thorough process of recapitalisation and, where necessary, restructuring of banks.
The failure of banks is very closely connected to the failure of the sovereign, said Papadia. Its useful to reduce that link, he said.
Finally, Papadia said that no sovereign bank should fear becoming insolvent because of illiquidity. But he believed that this problem had been dealt with in an effective way.