The euro area should rush to the defence of Spain and Italy in the bond markets using all the institutions it has at its disposal, said Angel Gurría, the secretary general of the Organisation for Economic Cooperation and Development.
Mr Gurría, an outspoken critic of the so-called "muddling-through" policy-making method in the eurozone, said it was time for the European Central Bank, the eurozone rescue funds and the European Investment Bank to be fully used to stem the ever-deepening sovereign debt and banking crises engulfing the currency bloc.
He warned against trying to use the area's rescue funds—also known as the "firewall"—to support sovereigns and their banks, arguing that there simply isn't enough money in it. The transitional European Financial Stability Facility and the permanent European Stability Mechanism—expected to be deployed in July—are capped at €700 billion, with the capacity to lend €500 billion beyond their existing outlays to Greece, Ireland and Portugal, which are already receiving bailouts.
He predicted that if the eurozone continues on the current muddling-through path, the outcomes will be "undesirable, unnecessary, expensive". "We don't have an organised response and support system to Spain and Italy, and we should have it", Mr Gurría said. He also said some countries in the euro area were fighting against each other instead of taking the necessary action to help out Spain and Italy.
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