This starts with delivering on fiscal austerity in key countries and full implementation of announced measures to make the European Financial Stability Facility more flexible. But more is required. The immediate priorities are to provide a funding backstop for vulnerable European sovereigns that is sized to the scale of the problem and a comprehensive capital plan for European banks.
In our opinion, this can be done by using existing European resources more efficiently. These steps must be complemented by governance reforms and credible fiscal arrangements within the European monetary union. In other advanced countries, the priority must be to agree on credible, concrete and executable plans to restore fiscal sustainability consistent with the commitments made at last year’s G-20 Leaders Summit in Toronto.