OECD chief says eurozone rescue mechanism credible

07:35, May 12, 2010      

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The massive rescue mechanism designed to prevent the Greek debt crisis from spreading in the euro zone is credible, chief of the Organization for Economic Cooperation and Development (OECD) said on Tuesday.

The rescue mechanism "has credibility" and was "the right size", OECD secretary general Angel Gurria told reporters after a meeting with European Commission President Jose Manuel Barroso here today.

Gurria said the mechanism, which amounted to 750 billion euros (952 billion U.S. dollars), would give breathing space for indebted eurozone countries to tackle their problems.

"I think it is going to generate the time to look objectively" at the fiscal problems that made it necessary in the first place, he said.

European Union (EU) finance ministers agreed Monday on the unprecedented rescue mechanism in a desperate bid to prevent spreading of the Greek debt crisis in the euro zone.

The 750-billion-euro package, designed as a safety net for other indebted eurozone countries like Spain and Portugal, would include 440 billion euros in loan guarantees by eurozone governments, 60 billion euros from the EU budget and 250 billion euros from the International Monetary Fund (IMF).

Markets saluted the deal and soared on Monday, but they lost some ground on Tuesday due to concerns over the effectiveness of the rescue mechanism and a worsening economic outlook for Europe amid the debt crisis.

Gurria said the markets are reacting positively to the rescue mechanism.

As part of the rescue mechanism, Spain and Portugal, which came under increasing pressure in recent days, promised to take further austerity measures soon to shore up confidence in the markets.

Gurria stressed that Spain and Portugal are different from Greece.

"Every single country has different situations," he said.

"We will see in the next few days Portugal announce special additional efforts and I am sure that tomorrow Spain will come out with a very strong package," he added.

Source: Xinhua


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