–BOE Posen: Biggest Issue Is To Make Banks Healthier
–Says Japan Deficit Reaching A Limit – No Need For Panic Though
–Comments Made In Nikkei Newspaper
LONDON (MNI) – Bank of England Monetary Policy Committee Member
Adam Posen sees a risk that the euro zone financial crisis could spread
to the U.K. and U.S. unless Europe moves to normalise its banking
system.
Posen said in an interview with the Nikkei newspaper that the
“biggest issue is to make banks healthier” and described the euro zone
crisis as a ‘chain reaction’ to the financial crisis which had begun in
the U.S.
Posen said that this had drawn attention to economic gaps among
European countries and “the economic system that is based on peacetime
cannot sustain it (the shock) any longer,” he said.
He also pointed out that the sluggish response of the euro zone to
the financial crisis had exacerbated its impact:
“European banks held a lot of junk (assets) but their response was
lukewarm compared with that in the U.S. and the U.K., which has deepened
the crisis.”
Posen said that the EMU banking system needed Japan-style medicine.
Unless Europe takes steps similar to those Japan tool in the early
2000s to normalize its banking system, he said that “there is a
possibility that the crisis will spread to the U.K., the U.S. and Japan
through an upset in the financial system.”
Posen also said that on the issue of Japan’s large fiscal deficit,
that there was no need for “panic” but added “it is reaching a limit.”
–London newsroom: 4420 7 862 7492; email: dthomas@marketnews.com
[TOPICS: M$B$$$,M$$BE$,MABPR$,MT$$$$]
