Osborne presented the following key points:
First, the eurozone members increase the firepower of their bail-out fund. If they are trying to protect larger countries, €440 billion is sadly not enough. How they increase that firepower—whether by using more paid-in resources, more leverage, or more help from the European Central Bank—is up to them.
He confirmed that Britain will not be a part of any permanent eurozone bail-out fund.
Alongside the ring-fence, there must be a recapitalisation. The European bank stress tests have not been nearly tough enough, as proved by the fact that Dexia did not fail them. The IMF now estimates that sovereign credit strain could have a direct impact of about €200 billion on European banks, and at last the European Banking Authority is working on a plan to test leading European banks against higher capital ratios and more credible benchmarks on their exposure to sovereign debt. European nations will need to set out the backstops that they have in place to raise capital privately if they can, or provide public capital if they cannot.
Full speech
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