U.K. Deputy Prime Minister Nick Clegg said that euro-area leaders’ job is “far from done” and that the region’s banks need to share liabilities to find a solution to the debt crisis.
“No one should fall into a false sense of complacency that the job is done,” Clegg said in a Bloomberg Television interview at his Liberal Democrat party’s annual conference in Brighton, southern England, last night. “What we’ve got to stop is this pendulum swing of bank crisis to sovereign debt crisis and back again. You need some kind of mutualization of bank liabilities, and that’s particularly important for the southern countries.”
A deepening crisis in the euro region is threatening global growth and has helped plunge Britain’s economy into its first double-dip recession since the 1970s.
While bond purchases by the European Central Bank have calmed markets, the 17 nations that share the single currency still need to make “painful” decisions to balance risks between cash-strapped southern nations and their northern partners, Clegg said.
The euro region needs “a new north-south deal, where the south accepts a degree of fiscal discipline from the north, and the north in effect accepts that the shares some of the liabilities of the south,” Clegg said. “That’s a very painful thing to accept politically.”