Ackermann Says Europe Needs Crisis ‘Firewall’

Deutsche Bank AG (DBK) Chief Executive Officer Josef Ackermann said Europe needs a “firewall” to prevent spillover from its debt crisis and should increase the size of its rescue fund.

“We need the firewall to cope with the spillover effect, if it occurs,” Ackermann, who also chairs the Institute of International Finance, said at a conference held by the Asian Development Bank and the Institute for Global Economics in Seoul today. “The stability facility should be increased.”

The failure of European leaders to end the debt crisis with their broadest effort yet has revived a Franco-German dispute over the European Central Bank’s role and fueled investor concerns over policy makers’ economic impotence. German Chancellor Angela Merkel has rejected French calls to deploy the ECB as a crisis backstop.

French Finance Minister Francois Baroin said in a speech in Paris on Nov. 16 that “the best way to avoid contagion is to have a solid firewall” by using central bank support for Europe’s 440 billion-euro ($595 billion) rescue fund. The European Financial Stability Facility should be increased to 1 trillion to 2 trillion euros, Ackermann said today, without explaining what he meant by “firewall.”

Banks represented by the IIF reached an agreement on Oct. 26 in Brussels with European leaders to accept a 50 percent writedown in the face value of Greek government bond holdings as part of wider measures to tackle the sovereign-debt crisis. The Greek deal was part of a European plan to cut the country’s debt load, recapitalize banks and boost the region’s rescue fund to 1 trillion euros.