Barroso urges stronger EU financial supervision

The EU needs stronger European financial supervision and greater consistency in national deposit guarantee schemes to stabilise the financial system, European Commission President Jose Manuel Barroso said.

Barroso said the existing system of regulation, based largely on national governments and regulators, could cope with the current crisis, but the European Union needed to go further in coordinated action to restore full confidence.

"We need a further strengthening of the supervision structures at European level," he told a news conference on Wednesday.

Rebuffing French calls for EU limits on state aid to be suspended or revised in the light of the crisis, he said upholding the competition rules was vital, but the Commission would apply them flexibly.

Barroso declined to make specific proposals such as a single European financial regulator or a pan-European guarantee on all savings deposits, saying he did not want to announce ideas that would not be followed by practical measures.

But the Commission was working closely with French President Nicolas Sarkozy, holder of the rotating EU presidency, on measures that could achieve consensus, he said.

Asked whether he favoured a greater role for the European Central Bank in banking supervision, he said the Commission was in close contact with the ECB, which was doing a great job in injecting liquidity to stabilise credit markets.

Barroso referred indirectly to British irritation at Ireland's sudden decision to guarantee all deposits in Irish banks, saying: "We need to improve the consistency of deposit guarantee schemes."

He also insisted that EU governments stick to pursuing structural reforms to make their economies more competitive, because the "real economy" was going to be under increased pressure as a result of the credit crisis.