EU official warns he cannot rule out a new rescue

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European competition chief Joaquin Almunia warned on Monday he cannot rule out a new rescue in the unfolding eurozone sovereign debt crisis.

The senior European policymaker's warning came as financial markets plunged over concern about a European Union split over how to tame the debt crisis and prevent a Greek default.

In an interview with Spanish business daily Expansion, Almunia said the outlook depended on the performance of the economy and its impact on financial entities and the financial system.

The EU commissioner said he hoped there would be no more sovereign debt rescues ahead.

"But with everything we have seen in this crisis, with the number of 'black swans' we have seen appear, of very low probability risks that have materialized, I don't think one can put one's hand in the fire and say we will never see this again.

"More than making predictions, what we need to do is to take the necessary decisions, have the political courage to carry them forward and coordinate as much as possible."

Some eurozone economies had less need of fiscal adjustments and were in better shape to contribute to aggregate demand in the other economies, Almunia said.

In a separate interview with leading daily El Pais, Almunia said the sovereign debt crisis showed that the eurozone needed greater political integration.

Markets were asking for the bloc to move towards a greater fiscal union and towards a single Treasury, he said.

"As long as the pending problems in the EU are not resolved, the European banking system will not be totally out of danger of a relapse," Almunia warned.

Hopes for a pooling of eurozone sovereign debt into a united eurozone bond would not be fulfilled until the countries with the best financial standing agreed to do so, he said.

"But realistically, they are not going to take that decision until they have sufficient guarantees," the commissioner said.

"And we still do not have all the guarantees from the countries that have to make adjustments, that are going to need financial help for the next years and that have to make the greatest efforts to put their public accounts in order," he said.

© 2011 AFP

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