ATHENS - the European Central Bank warned Governments Thursday, that you have a "unsustainable debt spiral" in the financial markets unleashing risk, if it failed you, their promises to cut to follow through budget deficits.
Although turbulence in European Government has diminished bond markets in the last days the Central Bank of 16 economies that use the euro, said "General economic and financial situation is still risky."
European Pressphoto Agency Commissioner for economic and Monetary Affairs Olli Rehn, links, and Greek Finance Minister George Papaconstantinou during a press conference after their meeting in Athens on Thursday.A six-monthly report on financial stability, identifies two main dangers: persistent concerns dismal public finances and large disparities between the national economies.
Worry about government debt could undermine economic growth and stability, a combination that that the ECB a "triangle of vulnerabilities, already has titled, Greece Ireland taken eroding banking.
Another risk was the possibility that a term used global imbalances - large current account deficits in the United States and large surpluses in countries like China and Germany refer - could be performed in a disorderly fashion.
That forces to lead "negative surprises from potential systemic importance" map shows the ECB.
Access thousands of business sources on the free Web not available. More informationA 210 page report the ECB highlights weaknesses in the banking sector region but didn't provide - differently than in its previous report in June - an estimate of future depreciation.
A potential trouble spot for banks in the euro block your need for approximately €1 billion (approximately $1.32 trillion) in bonds over the next two refinance are, it said. This task is more difficult because the private banks compete with Governments for investor funds. "It is this issue of competition with rulers," ECB Vice President Vitor Constâncio told a news briefing.
Asked whether the banks in implementing their refinancing needs be difficulties, Mr Constancio replied "it is hard to predict, of course...""even for the next two weeks."
Banks are a "small number" of the euro area still add "overly reliant" on short-term funds from the ECB, the report says that the banks for a "substantial share" of the ECB credit account.
Concerns "remain acute" about what will happen if the special measures provide the ECB Bank cheap these banks funding phases were introduced to alleviate the economic downturn. Last week the ECB unlimited loans with terms of up to three months until the first quarter of 2011 banks make available voted.
In other developments France specified prefers slowly go to proposals a euro zone emergency to expand bailout funds and also against the creation of pan European government bonds. Show comments from an official on President Nicolas Sarkozy's staff, Paris throws its weight behind Germany's reluctance to two ideas back forward as possibilities, to baste set Europe debt crisis.
The official said a 440 billion euro fund – the largest part of a € assembled enough for now 750 billion rescue package in may by the European Union and International Monetary Fund was great. The Fund will be to bail out Ireland pulled, but will be stretched to its limits, if it is necessary to save Portugal and Spain.
"Today the Fund for a size has possible demand to confront so the increase it not question, allowing", said the official, who spoke on condition of anonymity.
Mr Constancio of ECB reporters in Frankfurt, which could bring the Fund "technically" speak refused help deal with Europe's sovereign debt crisis but to say whether he would favour such a move.
Angela Merkel and Nicolas Sarkozy are Germany because meeting on Friday in Freiburg, with Ministers from the two Governments. , A new bailout funds, contact two other heads of State and Government in Brussels at a Summit replace next week the existing funds after 2013 to aim to agree. Will contracts require expected modest changes to bind the 27-nation EU.
The French official bonds issued this week by Luxembourg Prime Minister Jean-Claude Juncker and Italian Finance Minister Giulio Tremonti floated the idea of introducing the euro zone was dismissed.
"It's [idea], the difficulties, particularly with regard to providing moral hazard and the Division of costs and profits of such bonds," the French official said.The, the so-called s bond release Germany was also fixed. But the EU economy Commissioner Olli Rehn, speak in Athens Thursday, described it as an "intellectually appealing."
The Greek Parliament saying that Europe was making good progress in addressing their problems. But he added: "But it is clear that national politicians, European politicians and central bankers must prove common and decisive leadership."
In his report some improvement in financial conditions since its previous report in June quote the ECB. He said, the profitability of large banking groups in Europe is rising, but pointed out that you are significantly exposed to interest rate changes as returns on long-term bonds begin strongly differ across the euro area.
-Nick Skrekas and Alcman Granitsas contributed to this article.Write toAlcman Granitsas at the alkman.granitsas@dowjones.com
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