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Europe throws euro fresh lifeline

In Uncategorized on December 17, 2010 at 8:56 am

BRUSSELS, Dec 17, 2010 (AFP) – European leaders signalled a willingness to grant troubled nations a fresh financial lifeline, ring-fencing the euro in a bid to fend off market vultures once and for all.

With Portugal and even Spain predicted to need aid like Greece and Ireland, European Union president Herman Van Rompuy said they were “ready to do whatever is required to ensure the financial stability of the eurozone.”

Portuguese Prime Minister Jose Socrates (L) and French President Nicolas Sarkozy talk prior to a working session of the EU summit at the European Council headquarters in Brussels. AFP

While a Brussels summit stopped short of meeting myriad calls for a new injection of rescue funding, the “political will” of the 27 national leaders is “beyond doubt,” Van Rompuy insisted.

“It’s their way of saying they are prepared to put lots of money on the table,” explained a senior EU diplomat.

Belgian Prime Minister Yves Leterme also spoke of “a joint will to put in as much money as needed,” while a French governmental source said Paris certainly “is absolutely inclined to increase the size of the fund as much as necessary,” in a significant change of mood.

The moment had not yet come to talk of specific figures, with Ireland having tapped less than four percent of existing capacity put up by euro partners, but European Central Bank head Jean-Claude Trichet appeared less than excited.

After shelling out more than 72 billion euros since May on iffy eurozone bonds, Trichet said pointedly: “I relayed my messages.”

He has recently agitated for governments to take back the initiative after heavy criticism they were being enslaved by markets — echoed on Thursday by International Monetary Fund chief Dominique Strauss-Kahn.

A permanent emergency rescue fund will be established from mid-2013, to replace an existing trillion-dollar joint EU-IMF facility, with a rewrite of the EU rule-book ordered by 31 December 2012.

The latest EU stance is intended to draw a line under a year in which the bloc looked like being torn apart by wolves on international money markets after Greece secured a 110-billion-euro bailout in May.

Used to seeing trillions of dollars change hands in the blink of an eye, traders and analysts — less than impressed — simply mounted pressure on other weak points in the euro chain.

Nevertheless, the deal on the new permanent umbrella comes amid hopes the holiday season will offer respite similar to that leaders experienced during the World Cup.

The EU stressed that new loans and guarantees will only be made available if judged “indispensable” by peers, and as with Greece or Ireland, in exchange for painful cuts and other changes.

That tweak came at Germany’s insistence, although Europe’s paymaster made no discernible progress in a similar push for future bailouts to need unanimous backing — which many oppose as it would grant Berlin an absolute veto.

“Euro countries need to coordinate economic policy” more, Chancellor Angela Merkel said afterwards, describing that process as an “interesting but difficult task.”

Pending any fresh assault from Berlin, aid will be activated “by mutual agreement,” after choreographed legal manoeuvres by the 27 states over the next two years.

Thursday’s stance represents the birth pangs of shared cross-border governance 12 years after experts said the creation of the euro was flawed due to the absence of a central government to control economic policy.

However, a call to debate the introduction of E-bonds — pooled financial guarantees allowing each and every euro nation to borrow funds for national use at common rates — was left for another day.

Merkel insisted the plan “would not rid Europe of its weaknesses, it would simply transmit them across the board.” 

Source: SGGP

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