By Simon Miller

EU officials have dismissed calls for a “mandatory” recapitalisation saying that the European banking system’s health had improved.

Speaking at the Jackson Hole forum last week, head of the International Monetary Fund, Christine Lagarde had warned that urgent action was needed to avoid a global recession and another credit crisis.

However, at the European Parliament’s Economics committee meeting on Monday, officials said the system was strong enough compared with 2008 and called for Eurozone governments to quicken the implementation of the 21 July bailout agreement.

President of the European Central Bank (ECB) Jean-Claude Trichet commented: “There is no liquidity or collateral shortage for the European banking system."

Meanwhile, EU monetary affairs commissioner Ollie Rehn said the banks had improved their position although he conceded that Europe faced a "further moderation of growth".

However, Rehn also questioned whether the eurozone would accept the loss of national sovereignty that would come from the introduction of eurobonds.

He commented: “This would have unavoidable implications for fiscal sovereignty, which calls for a substantive debate in euro area member states to see if they would be ready to accept it.”

MEPS were critical of eurozone governments and praised the ECB for its handling of the continuing crisis.

"It is thanks to the ECB that we have not fallen victim to the big problems which have hit us recently" Werner Langen, MEP for Germany’s CDU said.

In a sly dig at member states, UK Conservative MEP Kay Swinburne asked Trichet: “Do you envisage yourself as an adviser to national politicians once you retire?"

At Jackson Hole on Saturday, Lagarde warned that there could easily be a further spread of economic weakness “to core countries, or even a debilitating liquidity crisis.”

She added: "Developments this summer have indicated we are in a dangerous new phase. The stakes are clear. We risk seeing the fragile recovery derailed. So we must act now.

"Put simply, macroeconomic policies must support growth. Monetary policy also should remain highly accommodative, as the risk of recession outweighs the risk of inflation."

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