Crunch week for the eurozone
The European Central Bank (ECB) must buy huge amounts of Spanish and Italian debt this week to avert a break-up of the euro, one of the UK's most eminent economists has warned.
Vicky Pryce, a senior managing director at FTI Consulting, said this weekend: "The ECB needs to act very quickly, or it's going to get into euro exit territory. The ECB must be more aggressive and make a statement by buying Italian and Spanish debt in big chunks."
Ms Pryce warned that money was taking flight to countries perceived as "safe havens" with sensible spending measures already in place, including the UK, Germany and Sweden.
Spain and Italy continue to suffer because of their debt burdens. The 10-year-bond spread, essentially the cost of borrowing, is 6.5 per cent for Spain and 6.71 per cent for Italy – both perilously close to the 7 per cent that triggered the crises in Greece, Ireland and Portugal.
But Mario Draghi, the ECB's new president, criticised eurozone governments on Friday when they made similar calls for him to act more decisively. Mr Draghi said that governments should concentrate on their austerity measures if they wanted to restore confidence.
Confidence in Spain could be restored after today's general election. Mariano Rajoy of the conservative People's Party is expected to be elected prime minister on a manifesto that pledges to cut public spending.
Tensions between the UK and Germany emerged at a meeting between David Cameron and Chancellor Angela Merkel on Friday. Mrs Merkel is against the ECB getting too involved in rescuing the eurozone, while the Prime Minister believes institutions must "do what is necessary to defend it".
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