Investors in financial markets are relying on the European Union and the International Monetary Fund reaching an agreement, Blessing said in a speech at the Frankfurt European Banking Congress today.
Greece’s fiscal woes have defied three years of rescue efforts and rekindled doubts about Europe’s crisis-containment strategy. More than 11 hours of talks to resolve the impasse failed this week amid a decision by EU ministers to grant Greece two extra years to cut its deficit.
Debt purchases by the European Central Bank calmed markets, but can only be “bridging loans,” Blessing said. Bold political moves on European integration are needed to stop the euro area from falling apart, he said.
“Time is running out,” Blessing said. “There are only two options - more integration or breakup.”
Banks should also implement Basel III capital rules “soon rather than later” and Europe will not accept the U.S. suddenly reneging on its commitments, Blessing said.
“We will not accept that America suddenly drops Basel III to favor its banks,” he said. “What we need is a level playing field.”
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