The EU is working on a “radical plan” to prevent a European credit crunch, according to a new report in the Times Of London (via CNBC).
The unsourced report said officials at the ECB and the European Commission are considering offering central guarantees over certain types of debt issued by banks.
The paper says this move comes after various banks were shut out of credit markets.
Yesterday at Jackson Hole, ECB Chief Jean-Claude Trichet reminded people that the ECB had options and was not afraid to use them. Sounds like he meant it.
Also IMF Chief Christine Lagarde said European banks needed “urgent recapitalization.”