Central banks act as euro zone crisis rages
By Robin Emmott and Kirsten Donovan
BRUSSELS/LONDON | Wed Nov 30, 2011 11:09am EST
BRUSSELS/LONDON (Reuters) - The world's major central banks acted jointly on Wednesday to provide cheaper dollar liquidity to starved European banks facing a credit crunch as the euro zone's sovereign debt crisis threatened to bring financial disaster.
The surprise emergency move by the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the central banks of Britain, Canada and Switzerland recalled coordinated action to steady global markets in the 2008 financial crisis.
The euro and European shares surged on the news, which came after euro zone finance ministers agreed to ramp up the firepower of their bailout fund but acknowledged they may have to turn to the International Monetary Fund for more help.
In a related move, Italy's central bank started emergency cash tenders for banks which have been squeezed particularly hard in recent weeks as Rome's borrowing costs have soared towards 8 percent, a level seen as unaffordable in the long term.
"We are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union," Economic and Monetary Affairs Commissioner Olli Rehn said as EU finance ministers met.
Two years into Europe's debt crisis, investors are fleeing the euro zone bond market, European banks are dumping government debt, south European banks are bleeding deposits and a recession looms, fuelling doubts about the survival of the single currency.
More: http://www.reuters.com/article/2011/11/30/us-eurozone-idUSTRE7AR0P320111130
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