EU Banks 'Need Billions More To Survive Crisis'

European banks need an extra 114.7bn euros (£97.7bn) to survive the eurozone debt crisis, the region's banking authority has said.

The European Banking Authority said the overall shortfall, including an emergency capital buffer, is 13.1bn euros (£11.1bn) for German banks and 7.3bn euros (£6.2bn) for French banks.

Meanwhile in Spain, the shortfall comes to 26.2bn euros (£22.3bn) and 15.4bn euros (£13.1bn) for those in Italy.

The banks now need to raise that capital and have until January 20 to present their plans - and until mid-June to complete them.

It comes as the European Central Bank said it would offer cheaper loans for banks struggling amid the financial crisis.

President Mario Draghi spoke at a news conference after the bank cut the base rate of interest for the 17 Eurozone countries to 1%, taking it back to the record low of earlier this year.

Mr Draghi said the bank will offer European banks more measures to ease their cashflow, including three-year loans and easing of spending criteria from January 2012.

He said the decision to cut the base rate was not unanimous.

The quarter point cut is aimed at countering the twin threat of recession and deflation caused by the region's debt crisis.

Mr Draghi also warned that inflation is likely to stay above 2% for several months to come.

Markets were unimpressed, however, with his efforts to try and deal with the eurozone crisis.

During his speech, the FTSE 100 turned negative, and was down 0.5%.

By the close of the markets, the FTSE was down 1.14% at 5483.77, the CAC closed down 2.53% at 3095.49 and the DAX lost 2.01% at 5874.44.

The main European markets did not take any comfort either from what they heard; the CAC was down 2.1% and the DAX lost 1.7%.

The bank has also downgraded its growth figures for next year, saying the outlook remains highly uncertain.

Mr Draghi said: "The intensified financial market tensions are continuing to dampen economic activity in the euro area and the outlook remains subject to high uncertainty and substantial downside risks."

He has previously hinted that further bond purchases were possible if Europe's leaders can come up with a credible plan to enforce budget discipline among the 17 countries that use the euro.


SKY