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Central banker warns euro could collapse unless bailout fund is increased

A former head of the Dutch central bank has warned that the euro could collapse unless stronger measures are adopted to stop the current crisis spreading.

Nout Wellink also claimed the current government in The Hague risked sparking a run on Greek banks by calling for countries to be expelled from the single currency if they failed to reduce their deficits.

He said the current plan for a €2 trillion European emergency fund was still too small to be “credible” and warned that without quick decisive action to “counter the undermining of the system” the euro was in peril.

In a new book, Wellink aan het Woord (Wellink Speaks), the former president of De Nederlandsche Bank calls for a special commission to be set up to recommend changes to the treaties that govern the euro.

He also said the European bailout fund would only soothe the markets’ fears about the euro if it was had enough capital to cover the worst possible scenario.

“We have learned from previous crises that you need to inject a surplus, an overkill of ammunition if you want to be credible to the financial markets,” he said.

On the subject of Greece, he warned that the statements of prime minister Mark Rutte and finance minister Jan Kees de Jager risked destabilising the eurozone.

“If you hear that your country could be kicked out of the euro, surely you go and take your money out of the bank?” he said.

“Don’t forget that Europe has free movement of capital. The Greeks can simply take their money out of their accounts and transfer it to Switzerland or any other country.”

Wellink is due to appear shortly before the De Wit commission, which is examining the credit and banking crisis.

Source: De Volkskrant: 'Rutte deed verkapte oproep tot Griekse bankrun'

Photo by Radio Nederland Wereldomroep