• European Commission calls for drastic action

By Hugo Duncan


The single currency crashed to its lowest level for nearly two years last night as Brussels warned that the eurozone faces ‘financial disintegration’.

In a hard-hitting report on the dire state of the economy, the European Commission called for drastic action to prevent catastrophe tearing the region apart.

It proposed that money set aside for keeping debt-ridden governments afloat should now be used to rescue troubled European banks.

Disintegration: The single currency crashed to its lowest level for nearly two years last night

Disintegration: The single currency crashed to its lowest level for nearly two years last night

‘Flexibility and speed are of the essence,’ said EC president Jose Manuel Barroso.

The desperate rallying cry came amid mounting fears that the banking crisis in Spain will cripple the eurozone’s fourth largest economy and trigger a cataclysmic break-up of the single currency.

The euro crashed below $1.24 against the US dollar to a level not seen for nearly two years.

The single currency was also trading below 80p against the pound having lost 20 per cent of its value in the last three years.

‘The market has lost confidence in the euro,’ said Carl Forcheski, a currency expert at French bank Societe Generale in New York. ‘People are battening down the hatches.’

Stock markets around the world were on the slide with the FTSE 100 index down 1.74 per cent or 93.86 points to 5297.28 on a punishing day for investors in London.

Chris Beauchamp, a market analyst at IG Index in the City, said: ‘Without wishing to sound apocalyptic, it does feel as if Spain is gradually shuffling towards the abyss.

'Flexibility and speed are of the essence': EC president Jose Manuel Barroso

'Flexibility and speed are of the essence': EC president Jose Manuel Barroso

‘Investor confidence wanes by the day, and it could only be a matter of time before the Spanish government is forced to ask for financial aid.

‘This would be an event of a far greater magnitude than the bailouts of Ireland, Portugal and Greece, since Spain’s size means it would exhaust Europe’s financial firepower.’

The EC said the eurozone bailout fund could be used to help banks directly rather than fund governments. It said it could ease pressure on countries such as Spain struggling to prop up the banking system.

‘To sever the link between banks and the sovereigns, direct recapitalisation might be envisaged,’ the report said.

The money would come from the European Stability Mechanism, the eurozone’s permanent bailout fund which launches in July but is currently only designed to lend to governments.

Brussels said: ‘A closer integration among the euro area countries in supervisory structures and practices, in cross-border crisis management and burden sharing, towards a ‘banking union’ would be an important complement to the current structure.’

It also floated the idea of Eurobonds - a move that would see debt issued jointly by all 17 countries in the eurozone.

The idea is vehemently opposed in Berlin because it would involve German taxpayers underwriting Greek and Spanish debt.

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Don't blame the Germans. Blame the Euro. The whole idea of creating a single currency with such diverse people and economies was doom to failure. The fact that it has lasted 10 years is the miracle ! The sooner the inevitable takes place the better. Then the world can lick its wounds and get back to sanity. After the euro is extinguished attention needs to be given to the entire basis of the EU. It should be reverted back to the "common market" which is what people in this country voted for. A simple trading agreement is all that is needed.

Euro is only as strong as its weakest link!

The Euro is doomed, companies are rejecting payment in Euros and when that happens it's only a matter of time when the Euro will collapse, the important thing is to ensure that those that brought this EU left wing dictatorship upon us without our permission are brought to justice, they can't be allowed to get away with all the criminality they've committed.

It takes my breath away that Brussels does not recognise financial disintegration when it sees it and insists on warning us about it. THIS IS IT BRUSSELS IT HAS ALREADY ARRIVED AND YOU ARE WITNESSING IT RIGHT NOW.

This not a slump but a return to where the Euro should be against the . Does our tourism good.

Barosso and his unelected eurocrats will not be satisfied until they have brought Europe to its knees and war might be the unintended consequence.

This is not a slump but more like where the Euro should be against the . Helps to bring tourists to our island.

It is only a matter of time before this whole monster that is the EU crumbles in a financial tsunami. The longer they leave it to break up rather than disband it will only make it worse for all concerned. Sadly there are no politicians especially in the UK that will admit to this and do something about it. It would only take one brave leader to pull out and that would open the floodgates for the rest. There is a lot of pain coming to Europe for the little people and unless they act now to demand action there will be scenes like we have seen in Greece everywhere.

A return to the gold standard would solve all problems. We all know what gold is worth.

The Germans wanted the Euro because it kept their economy growing. It was a 'high risk, high reward' strategy and they lost the gamble. The Germans should pay.

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