European Commission President Jose Manual Barroso has unveiled details of a bank recapitalisation plan to help cope with the euro zone’s debt crisis.
“For confidence to return we need to fix the sovereign debt problem,” Barroso told lawmakers in the European Parliament.
“We must therefore urgently strengthen the banks, because, in fact, those two issues — the sovereign contagion and the banks — are now, whether we like it or not, linked,” he said. “This must be coordinated through the member states, the European Banking Authority, the ECB and the Commission.”
Barroso also said the European Commission would make a proposal on common euro zone bonds by the end of the year.
European banks are having trouble raising money for their reserves due to market worries about their exposures to Greek and other euro zone government debt.
Europe’s banks expect to be told to raise more capital under a Franco-German effort to solve the euro zone debt crisis after the state rescue of Franco-Belgian lender Dexia on Sunday.
The European Commission last week flagged up plans for a coordinated injection of funds into the region’s banks.
Earlier this week, after meeting with Dutch Prime Minister Mark Rutte, Barroso said he favoured a Dutch proposal for a budget commissioner who can force countries to take austerity measures if they break euro zone budget rules.
“We need stronger governance, more discipline. We need integration and discipline,” Barroso said.