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ECB`s Liikanen warns of global crisis - report
HELSINKI (Reuters) - Europe's debt crisis could turn global if politicians fail to act rapidly, European Central Bank Governing Council member Erkki Liikanen said in an interview with Finnish magazine Suomen Kuvalehti.
"There is a big risk that the European debt crisis contagion cannot be dammed from spreading to a global crisis," Liikanen, who also heads the Bank of Finland, said in the interview due to be published on Friday.
"Concrete actions are now necessary. It is very important to implement the July 21 decisions and that the European Financial Stability Facility, EFSF, becomes fully operational."
Euro zone leaders agreed on July 21 to give the EFSF more powers, including the ability to give precautionary loans to countries and to buy sovereign bonds of struggling states. The changes need to be approved by national parliaments.
The European Central Bank launched a controversial bond-buying programme in May last year and has spent around 80 billion euros ($109 billion) over the past six weeks buying Spanish and Italian debt.
Earlier this month ECB Executive Board member Juergen Stark announced he would resign for personal reasons, although sources told Reuters that the resignation was a protest against the bond-buying programme.
Liikanen said the bond-buying programme was a new and unusual tool for the ECB and noted the bank's balance sheet has swelled a little compared to the Fed and Bank of England.
"These purchases are of course legal, because they take place in the secondary market at market prices. But laws prevent government bond purchases at issuance to avoid central banks financing states," he said.
(Reporting by Terhi Kinnunen; Editing by Toby Chopra)
Source: http://www.moneycontrol.com/news/wire-news/ecb%60s-liikanen-warnsglobal-crisis-report_589557.html
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