BERLIN (MNI) – Eurozone leaders will not come to definitive
decisions on a comprehensive package to overcome the sovereign debt
crisis at their summit on Friday, a senior German government official
said Thursday.

“We are in the phase where we will have an exchange of opinions
tomorrow but won’t have any decisions,” the source explained. Decisions
will not be taken until the EU summit on March 24/25, he said.

Germany is opposed to allowing the European Financial Stability
Facility (EFSF) or the future European Stabilization Mechanism (ESM) to
buy bonds of ailing Eurozone member states on secondary markets or
giving money to these states to buy back their own bonds, the official
stressed.

“The idea that the ESM or another mechanism could buy bonds on
secondary markets is not conceivable for us,” the source said, “neither
directly nor indirectly.”

The official said any change to the initial regulations for the
EFSF would have to be approved by the German parliament as well. The
ruling CDU/CSU-FDP coalition recently approved a resolution opposing
bond buybacks.

Chancellor Angela Merkel will reaffirm at Friday’s summit that for
Germany any aid to ailing Eurozone member states hinges on the condition
that this would be indispensable to prevent a collapse of the Eurozone
as a whole, the official explained. Furthermore, these countries have to
agree to specific budget consolidation and reform programs, he added.

A possible funding increase of the EFSF so that it can lend out all
of its E440 billion will also not be decided tomorrow, the source said.
“Many preconditions currently do not exist for this question to be
raised,” he argued. Yet the topic will surely be discussed later on as
part of the overall package, he said.

A request by the Irish government to lower the interest rates on
the loans granted by the EFSF will also not be decided on Friday, the
official said. This demand needs to be studied more closely before any
decisions can be made, he explained.

Preparations for the Competition Pact proposed by Germany and
France are progressing well, the official said. There seems to be even a
solution for the contentious issue of wage indexation in some countries:
“There will be a demand for these countries to review their indexation
regimes under the viewpoint of the goal to bring wage developments into
line with productivity developments,” the official explained.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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