Eurozone finance ministers must raise ONE TRILLION euro bailout for the 'mother of all firewalls' says OECD chief

Eurozone finance ministers must raise ONE TRILLION euro bailout for the 'mother of all firewalls' says OECD chief

* Angel Gurria says an impressive firewall is crucial because the eurozone's debt crisis is not over
* Ireland also reveals it will stage a referendum on the European Union fiscal treaty on May 31

By Anthony Bond
27 March 2012

The eurozone bailout fund should be increased to 1 trillion euros to provide 'the mother of all firewalls', the head of a leading international development body said today.

Angel Gurria, the secretary general of the Organization for Economic Co-operation and Development (OECD), said eurozone finance ministers need to impress finance markets with the size of their rescue fund for indebted countries when they meet later this week.

Mr Gurria said an impressive firewall was crucial because the eurozone's public debt crisis was not over despite calmer financial markets this year, warning that the bloc's banks remain weak, debt levels are still rising and fiscal targets are far from assured.

Investors and many European officials want ministers to agree to a combination of the 17-nation currency area's two rescue funds to nudge the International Monetary Fund into backing debt-stricken European economies, should they need help.

Despite Mr Gurria's repeated calls for a euro bailout fund of around 1 trillion euros ($1.3 trillion), the bloc's finance ministers look more likely to agree to a level nearer 700 billion euros when they meet on Friday in Copenhagen.

Speaking today, Mr Gurria said 'The mother of all firewalls should be in place, strong enough, broad enough, deep enough, tall enough, just big.'

Eurozone finance ministers are expected to agree on combining the European Financial Stability Facility (EFSF) with its permanent European Stability Mechanism (ESM).

German Chancellor Angela Merkel signalled for the first time on Monday that she was prepared to consider boosting the firewall's resources.

As the eurozone economy flounders for the second time in just three years, the OECD said in a report the 17-nation area needed ambitious economic reforms and there could be no room for complacency.

'The pressure has come down, but we can't draw too much comfort from signs of healing,' Mr Gurria said at the report's presentation in Brussels.

'Risk spreads remain at unsustainable levels for some countries and have showed signs of creeping up in the last few days,' he told a news conference.

In a departure from forecasts by the International Monetary Fund and the European Commission, the OECD sees 0.2 percent growth in the bloc in 2012, rather than an outright contraction, although an OECD official said that is likely to be downgraded.

While international economists are divided over just how deep any downturn will be this year, most agree that weak business confidence and budget austerity is eating into the purchasing power of European households, driving up unemployment and leaving Asian and U.S. demand holding the key to growth.

Two years into the eurozone's sovereign debt saga, EU leaders' commitment to fiscal discipline and the European Central Bank's stimulus of 1 trillion euros to banks have cooled the panic in money markets which late last year drove Italian and Spanish bond yields to near unsustainable levels.

IRELAND SETS DATE FOR REFERENDUM ON TREATY

Ireland's foreign minister says his debt-crippled country will stage its referendum on the European Union fiscal treaty on May 31.

Eamon Gilmore told lawmakers today that the government was confident of winning majority public support for the pact.

It proposes tighter spending and deficit rules for the 17 countries which use the euro.

Ireland is the only eurozone member to take the fiscal treaty to a popular vote.

Anticipating a possible rejection by Ireland, the treaty's designers decided it can become law once only 12 eurozone members ratify it.

Should the public in Ireland vote to reject the tougher rules, the government could be blocked from tapping EU rescue funds in any future bailout.

Ireland's government currently relies on a (euro) 67.5 billion ($90 billion) EU-IMF credit line due to run out in 2013.