ECB must intervene to avert euro catastrophe: Poland

21st November 2011, Comments 0 comments

The European Central Bank must intervene "massively" to buy the bonds of debt-wracked eurozone countries or Europe faces a catastrophe that could lead to war, Poland's finance minister said on Monday.

Jacek Rostowski, whose country currently holds the rotating EU president, told German daily Frankfurter Allgemeine Zeitung: "We have a hideous choice ... either a massive intervention from the ECB or a catastrophe."

If the eurozone were to break up, "we would lose a huge part of our economic output. There is a danger of a historic economic disaster -- like the Great Depression in the 1930s -- that would lead to war in Europe," he added.

The ECB has come under increasing pressure to act as the so-called "lender of last resort" to bolster indebted countries and prevent the crisis spreading throughout the eurozone.

The Frankfurt-based bank has refused, arguing that its sole responsibility is to protect against inflation, and has won the powerful backing of German Chancellor Angela Merkel.

Rostowski warned of the potentially dire consequences of the debt crisis. "If we don't succeed in calming the markets, there is not the slightest chance that the crisis will stop at Italy, he said.

"It will spread to every country in the eurozone. I repeat: to every country, including Germany."

He added: "The danger of contagion is now greater than ever and the sums that we need to stop it have also risen because we acted too slowly."

Further pressure on the ECB came in the shape of the German head of the European Bank for Reconstruction and Development, who said fears in Berlin that unshackling the ECB would lead to hyperinflation were overblown.

"Even if you have previously had a bad experience with flooding, you still need to have water at hand when a fire breaks out," Thomas Mirow told the Financial Times Deutschland in an interview.

Germany remains scarred by the experiences of the 1920s when the central bank printed too much money, leading to hyperinflation and eventually, the rise of Nazi dictator Adolf Hitler.

© 2011 AFP

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