BRUSSELS: Euro zone finance ministers are ready to sign off on an increase in the region's financial firewall this week, with concerns about Spain's fiscal position banishing any complacency that the currency bloc's debt crisis is a thing of the past.
Finland and Germany were initially reluctant to endorse an increase in the firewall's resources, but both have now indicated that they are prepared to back the move when finance ministers meet in Copenhagen on March 30-31.
German Chancellor Angela Merkel, speaking in Berlin on Monday, gave veiled approval, saying she could imagine the euro zone's temporary crisis fund, the EFSF, running in parallel with the permanent fund to create a bigger facility.
Finnish Prime Minister Jyrki Katainen did the same on Saturday.
"We are ready to find a compromise," Katainen told Reuters on the sidelines of a gathering of financial, political and trade leaders in Saariselka, a resort in Finnish Lapland.
The European Commission has prepared three options for boosting the firewall, all of which rely on ways of combining the EFSF's 440 billion euros with the 500 billion euros in the European Stability Mechanism (ESM), which will come into force from July this year.
Officials indicate that the most likely outcome is an endorsement of an option that essentially takes what is left in the EFSF after bailouts to Portugal, Ireland and Greece with the ESM to create a 'super-fund' of around 740 billion euros.
"That will take several years, and then the ESM will stand alone with the 500 billion," Merkel told a conference of her ruling Christian Democrats.
Under the proposal, the overall capacity would return to 500 billion in July 2013, when the EFSF expires.
"That looks like the most plausible option, although it's still going to be hard to sell to the German parliament," said Carsten Brzeski, an economic analyst at ING in Brussels.
"It would clearly do the job as long as it was followed up by some action by the IMF and G20," he said.
The IMF will meet in Washington on April 20-22 and is expected to agree to increase its own crisis-fighting resources as long as Europe has taken significant action first.
In its options paper, obtained by Reuters, the European Commission indicated that creating a 740-billion-euro fund would provide "the necessary credibility to unlock an increase in IMF resources", although that will depend on the IMF.
NO COMPLACENCY
European leaders have been debating what action to take on the firewall for months, with German and Finnish officials quietly sceptical about the need to boost resources given that the debt crisis has calmed since the European Central Bank summoned up over a trillion euros of three-year money for banks.
Others argue that it is critical that the euro zone act now to bolster resources, capitalising on the relative calm in markets to show that the region is determined not to be complacent about getting its finances in order.
"It is important that Europe is now completing its comprehensive crisis response," Olli Rehn, the European commissioner for economic and monetary affairs, told reporters during the gathering in Lapland.
indiatimes.com
Finland and Germany were initially reluctant to endorse an increase in the firewall's resources, but both have now indicated that they are prepared to back the move when finance ministers meet in Copenhagen on March 30-31.
German Chancellor Angela Merkel, speaking in Berlin on Monday, gave veiled approval, saying she could imagine the euro zone's temporary crisis fund, the EFSF, running in parallel with the permanent fund to create a bigger facility.
Finnish Prime Minister Jyrki Katainen did the same on Saturday.
"We are ready to find a compromise," Katainen told Reuters on the sidelines of a gathering of financial, political and trade leaders in Saariselka, a resort in Finnish Lapland.
The European Commission has prepared three options for boosting the firewall, all of which rely on ways of combining the EFSF's 440 billion euros with the 500 billion euros in the European Stability Mechanism (ESM), which will come into force from July this year.
Officials indicate that the most likely outcome is an endorsement of an option that essentially takes what is left in the EFSF after bailouts to Portugal, Ireland and Greece with the ESM to create a 'super-fund' of around 740 billion euros.
"That will take several years, and then the ESM will stand alone with the 500 billion," Merkel told a conference of her ruling Christian Democrats.
Under the proposal, the overall capacity would return to 500 billion in July 2013, when the EFSF expires.
"That looks like the most plausible option, although it's still going to be hard to sell to the German parliament," said Carsten Brzeski, an economic analyst at ING in Brussels.
"It would clearly do the job as long as it was followed up by some action by the IMF and G20," he said.
The IMF will meet in Washington on April 20-22 and is expected to agree to increase its own crisis-fighting resources as long as Europe has taken significant action first.
In its options paper, obtained by Reuters, the European Commission indicated that creating a 740-billion-euro fund would provide "the necessary credibility to unlock an increase in IMF resources", although that will depend on the IMF.
NO COMPLACENCY
European leaders have been debating what action to take on the firewall for months, with German and Finnish officials quietly sceptical about the need to boost resources given that the debt crisis has calmed since the European Central Bank summoned up over a trillion euros of three-year money for banks.
Others argue that it is critical that the euro zone act now to bolster resources, capitalising on the relative calm in markets to show that the region is determined not to be complacent about getting its finances in order.
"It is important that Europe is now completing its comprehensive crisis response," Olli Rehn, the European commissioner for economic and monetary affairs, told reporters during the gathering in Lapland.
indiatimes.com
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