BRUSSELS (MNI) – It is “essential” that Eurozone governments reach
an agreement this week to boost the currency bloc’s crisis firewalls,
the European Commission said on Monday.
Finance ministers are due to review the size of the Eurozone’s
current and future crisis funds — the European Financial Stability
Facility and the European Stability Mechanism — at an informal meeting
of EU finance ministers in Copenhagen this coming Friday and Saturday,
after having promised to tackle the subject by the end of the March.
An agreement this month would allow Eurozone members of the G20 in
April to argue to their American, Chinese and other G20 counterparts
that Europe has met their demands to do more to tackle its sovereign
debt crisis, and potentially unlock talks to boost the International
Monetary Fund’s own crisis funds.
Boosting the Eurozone’s firewalls would “remove any doubt about the
commitment of the euro area to over and manage this crisis,” a spokesman
for the commission said, arguing that such a move would have a
“dissuasive effect” against sepculators and would “reinforce
confidence.”
At present, the combined capacity of the EFSF and ESM is capped at
E500 billion euros. European finance ministers are expected to discuss
options that would raise the total amount of crisis funds available,
including combining the two, and allowing them to run simultaneously for
a while.
Combining the capacities of the temporary EFSF and its permanent
successor, the ESM, would give Europe almost E1 trillion to intervene in
markets, aid troubled banking sectors and shield government issuers from
market pressures. While the Commission is keen to establish as big a
firewall as possible, AAA-rated Germany and Finland would prefer a more
modest increase, and possibly only a temporary one.
–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com
[TOPICS: M$$CR$,MFX$$$,MGX$$$,M$X$$$]