EU chiefs draw up financial crisis 'exit strategy' for 2011

2 October 2009

European Union finance chiefs have said that government stimulus measures for banks in the Eurozone should begin to be halted by 2011 at the latest.

European Central Bank president Jean-Claude Trichet told a meeting of European finance experts in Sweden that once economic growth takes hold European governments should start to end their stimulus schemes.

His words came following a paper from the Brussels-based Breugel research group which sketched out an exit strategy from government financial support for Europe's banking institutions.

"Bank recapitalisation and restructuring should be completed in all EU countries as a matter of urgency," said the report.

It added that the European Commission should work with central banks to come up with clear deadlines for the phasing out of liquidity support.

The authors also said that governments must combine the withdrawal of the stimuli in 2011 with prioritising consolidating their budgets over making cuts.

A stress test of the EU's biggest banks said they could withstand more than $580 billion of additional losses over the course of this financial year.

By Claire Archer

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