Europe Is Cracking Up

While France furiously attack Britain over their attitude towards the gigantic bailout, ECB-governor Jean-Claude Trichet is under heavy fire in Switzerland. Back in Brussels, E.U. president Jose Manuel Barroso is screaming for “additional efforts” to stabilize the financial markets.

“It’s not just about giving money.”

Jose Manuel Barroso

European Commission President Jose Manuel Barroso is calling on member states to tackle the imbalances behind the euro zone’s recent crisis, as the sheen on Europe’s day-old financial support mechanism already shows signs of fading.

“It’s not just about giving money, its about asking member states of the euro zone to make additional efforts for the correction of some unbalances that still exist,” Mr Barroso said on Tuesday after meeting with OECD secretary general Angel Gurria in Brussels, according to EUobserver.com.

EU finance ministers yesterday agreed a massive €750 billion relief package, together with the IMF, to prop up struggling euro zone governments that may need to request external help.

Just days before, euro area leaders signed off a €110 billion bail-out for Greece.

Mr Gurria says Monday’s rescue package “has credibility” and was “the right size”. “I think it is going to generate the time to look objectively” at the fiscal problems that made it necessary in the first place, he added.

“We will see in the next few days Portugal announce special additional efforts and I’m sure that tomorrow Spain will come out with a very strong package,” the OECD chief said in reference to the two southern economies that have come under the glare of markets.

Mr Barroso’s comments come less than 24 hours before the EU executive is due to publish an ideas paper on greater economic co-ordination and tighter budgetary rules for the European Union.

Amongst other ideas expected to feature in Wednesday’s commission communication are plans to reduce EU funding for national governments that repeatedly break the bloc’s budgetary rules.

The Tragedy of The Common(wealth)

However, the EU members are already fighting among themselves after they committed to the biggest bailout in history yesterday, and after a short relief rally the financial markets continued is meltdown.

Furious at the UK‘s refusal to participate in the euro zone bail-out, France has brusquely warned that Europe will not come to Britain’s aid when – not if – the markets round on sterling.

The French market regulator, Jean-Pierre Jouyet, on Tuesday told Europe 1 radio that it is inevitable that the pound will be targeted and that when that happens, Britain will be on its own.

“The English are very certainly going to be targeted given the political difficulties they have. Help yourself and heaven will help you,” he added.

“If you don’t want to show solidarity with the euro zone, wait and see what happens outside it.”

When the E.U. leaders scrambled to cobble together a half-a-trillion-euro bail-out for the single European currency, the U.K.’s main priority was to avoid being part of the scheme.

British finance minister Alistair Darling at the time said: “When it comes to supporting the euro, obviously that is for the euro zone countries.”

The warning from Mr Jouyet, a former Europe minister and a confidante of President Nicolas Sarkozy, comes as rating agencies are considering a downgrade from the UK’s tripe-A credit rating.

Sure, Trichet! (Nobody Believe You Anyway)

European Central Bank President Jean-Claude Trichet has mounted a vigorous defense of the bank’s decision to purchase government bonds, insisting he did not give in to pressure from national politicians.

Shortly after EU finance ministers unveiled the financial rescue package in the early hours of Monday morning, the ECB indicated its intention to start purchasing “public and private debt securities” as part of the co-ordinated relief effort for struggling euro zone states.

“We are fiercely and totally independent. This decision is the decision of the governing council and not the result of any kind of pressure of any sort,” the ECB chief said later in the day after a meeting of central bankers at the Bank for International Settlements, Basel, Switzerland.

The central bank has justified its decision to enter into the sovereign debt secondary market as a necessary measure “to ensure depth and liquidity in those market segments which are dysfunctional.”

Investors had cited the lack of such a decision at last Thursday’s meeting of the ECB’s governing board as one of the reasons behind the subsequent plunge in global stock markets the following day.

Despite being in close contact with national governments over the weekend, Mr Trichet said the bank’s decision to perform an apparent u-turn was made “taking into account the circumstances to do what we had to do, totally independently of any kind of signalling or suggestion or whatever.”

“I told that to the various governments of Europe in the fiercest manner, including when I had a meeting with the heads [on Friday]. That’s as clear as that,” he said.

Related by the Econotwist:

Norway’s Central Bank Ready To Help E.U.

Bailout Euphoria Is Evaporating

Scandinavian Reactions To E.U. Measures: “We Are Not Safe”

Bank Funding Crunch Deepens as Swap Rates Soar

E.U. Prepared To Set Up Own Rating Agency

Europe To Fight Speculators With “Secret Plan”

European Banks Loaded With Greek Debt