(AFP) – Nov 22, 2011
BRUSSELS — The US ambassador to the European Union weighed in Tuesday on a raging debate over the role of the European Central Bank, saying the ECB has the potential to contain the eurozone debt crisis.
European Union governments are divided over whether the ECB should rush to the rescue of the eurozone, with economic powerhouse Germany and the bank itself opposing such radical action.
"We are watching very intently what the ECB is able to do and the potential for it to do more," US ambassador William Kennard told journalists in Brussels, noting that the US Federal Reserve has acted to stabilise the US economy.
"Obviously in the depth of our crisis, we were able to use the Fed in ways that are different from the ways Europe is able to use the ECB, that's a very fundamental difference in our structure," he said.
The US central bank acts as lender of last resort with a limitless programme to buy US treasuries in the bond market.
The ECB has bought nearly 200 billion euros of debt of struggling nations in the secondary markets, but it has resisted pressure to intervene on a massive scale.
France has pushed for the ECB to step up its role and proposed that the Frankfurt institution be allowed to lend funds to the eurozone's bailout fund without limits.
Germany fears that such moves would drive up inflation and discourage profligate nations from curbing their spending.
German Chancellor Angela Merkel on Tuesday forcefully rejected the idea of making the ECB the lender of last resort, saying that this "wouldn't work."
The United States has urged European leaders to act quickly to resolve the debt crisis amid fears that the eurozone's fiscal troubles could sink the entire world into recession.
"The outcome of this crisis is pretty unpredictable," Kennard said. "We don't know how it will be solved. I don't think anybody can predict how it will be solved."
The US envoy reiterated Washington's reluctance to increase the resources of the International Monetary Fund in order to boost its ability to help the eurozone.
"We've made very clear that we feel it is a crisis that Europe must solve on its own and has the resources to solve on its own," he said.
"There needs to be a firewall, a commitment of significant resources to deal with the problem," he added.
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