Canada's Flaherty: Europe's EFSF must be larger (by Greg Robb)

WASHINGTON (MarketWatch) - Europe's response to the growing financial crisis "is not quite there yet" and the region's leaders must expand the size of their bail-out fund so it can help recapitalize ailing banks in the region, Canadian Finance Minister Jim Flaherty said Friday. Flaherty said Europe has made some progress by agreeing in the G-20 communique to increase the "flexibility" of the bail-out fund, the European Financial Stability Facility. "The first thing that the Europeans need to do is have their various parliaments approve the expanded role of the EFSF. "And then there is a question of the size of the [EFSF] and whether it is adequate or not. Our view is that it needs to be larger to have the clear capacity to overwhelm the problem," Flaherty said. The key is to control possible contagion for European banks from "the grave challenge" facing Greece in paying back its government debt.