EU ministers eye $924bn rescue fund
Brussels, March 24, 2012
Euro zone finance ministers are moving closer to agreeing a combined rescue fund of around 700 billion euros ($924 billion) in Copenhagen next week and anything higher would probably be too ambitious, euro zone diplomats said yesterday.
The European Union (EU)'s top economic official, Olli Rehn, is pushing for a big fund capable of bailing out indebted euro zone countries such as Italy and Spain, should they be cut off from the markets, despite resistance in Germany, the bloc's paymaster.
Germany has refused to countenance any combination of the rescue funds but could raise its own contribution to provide a short-term boost to euro zone defences.
In a final push to press Berlin and others to go further, the European Commission (EC) circulated a document to member states in Brussels, proposing an increase to as much as 940bn euros.
But three diplomats said that was unrealistic, as the European Central Bank has already injected one trillion euros in stimulus to banks, and EU governments have committed to tough economic reform and fiscal discipline to calm financial markets.
Finance ministers and central bankers will discuss the size of a bailout firewall in Copenhagen on Friday.
That would likely be made up of the European Financial Stability Facility that had been due to be wound up next year, and European Stability Mechanism permanent fund that was set to replace it.
The 440 billion euro EFSF and the 500bn euro ESM now have a combined lending ceiling of 500 billion euros, which means that in the 12 months from July, when they will co-exist, they would not be able to lend beyond that limit.
Under the EC's central proposal, the two funds would be allowed to add up to 940bn euros, transferring the EFSF's remaining firepower into the ESM. That means the lending capacity of the ESM would be 740 billion euros, taking out existing emergency loans to Portugal, Greece and Ireland.-Reuters