European leaders are poised to use two rescue funds to buy Spanish and Italian debts in a £600bn bail-out, as a Bank of England policy maker tells traders to prepare for a devastating market seizure like that seen as the collapse of Lehman Brothers.
Cheap and ready access to the liquid assets that oil the financial markets are under threat from both state-imposed capital controls and flagging confidence in the euro, said Robert Jenkins, a member of the Bank’s Financial Policy Committee.
Without easy access to liquidity, markets could seize in a re-run of the credit crunch after the collapse of Lehman Brothers, he warned.
The warning comes after it emerged last night that European leaders are poised to announce a £600bn deal to bail out Spain and Italy.
Two rescue funds are to be used to buy the debts of the troubled economies, the cost of which have reached record highs in recent weeks.
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VN:F [1.9.22_1171]Debt crisis: prepare for Lehmans re-run, Bank official warns, as leaders poised to bail out Spain and Italy (15),