Stopping the tide

The latest recommendations by European Commission President Jose Manuel Barroso amount to a confession of sorts. During the EU summit at the end of July, member states came to an understanding on a new set of measures to combat the euro crisis. Yet even before all 17 eurozone states have approved that package, Barroso has already admitted that those measures won't cut it.

Although the member states had made assurances that private sector participation in the bailout would be limited to Greece, the risk of a debt contagion has not been fenced in, according to Barroso.

"To decisively put a stop to this threat that is hampering all our efforts we must strengthen the euro's firewalls, we must have credible stronger instruments," he said.

More bailout money

Most experts already believe that some of Greece's debt will have to be forgiven even if Barroso would argue otherwise. Many fear, however, that the same fate also confronts other countries like economically much more important Italy. Already European banks are in hot water due to possible debt write-offs.

The banks would receive financial injections, forcibly in an emergency situation and with state means, according to Barroso's plan. He also believes that the bailout fund, the European Financial Stability Facility (EFSF), may soon become too small.

Although Barroso has shied away from providing numbers, Guy Verhofstadt - the head of the liberal pro-business ALDE group in the European parliament - spelled out the situation clearly.

"The truth is that we have to triple the funds in the EFSF, at least to triple otherwise it's not convincing for the financial markets," Verhofstadt said.

Political difficulties

Yet it's already clear that such a drastic increase to the fund would be very difficult to implement politically. And the Slovakian parliament is still wrestling over the old package from July, which is already considered obsolete. The taxpayers fear unforeseeable liabilities and a possible wave of bank bailouts.

Martin Schulz, head of the socialists, criticized the member states for having learned nothing from the last crisis that began in 2008.

"We are in a situation where - three years after the most difficult of bank crises - we have to recapitalize the banks without having passed the necessary regulations in the meantime," Schulz said.

Rebecca Harms of the Greens was even more severe, accusing bank heads like Deutsche Bank chief Josef Ackermann of having prevented the state from having more influence.

"I believe that we have to connect the recapitalization with the farthest reaching of controls," Harms said. "It must be clear that when we give money then the party has to come to an end for those in the banking industry."

Although the prospect of re-capitalizing the banks sparked outrage in the European parliament, most representatives accept Barroso's recipe for a larger European answer to the current crisis.

Euroskepticism

There are, however, some voices that reject Barroso's plan. Nigel Farage from the UK Independence Party belongs to a growing group of euroskeptic representatives who believe the entire approach to the crisis is wrong. Farage believes that the currency union itself was a mistake.

"All you can do Mr. Barroso is stand up and say we need more power," Farage said. "People like you who have been the architect of this failure, the architect of the misery that is being inflicted upon millions, want more power."

Barroso wants to present his recommendations during the next summit of EU heads of state and government on October 23. The summit, however, has been postponed by just under a week in order to allow more time to consider reforms. Yet in the world of the euro-crisis, a week is a long time.

Author: Christoph Hasselbach, Brussels / slk
Editor: Andreas Illmer