EU moves toward eurozone rescue
Source: Agencies |
October 25, 2011, Tuesday
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Print Edition
Print Edition
EU leaders have made some progress toward a strategy, nearing agreement on bank recapitalization and on how to leverage the rescue fund to try to stop bond market contagion.
But final decisions were deferred until a second summit tomorrow and sharp differences remain over the size of losses private holders of Greek government bonds will have to accept.
French President Nicolas Sarkozy backed down in the face of implacable German opposition to his desire to use unlimited European Central Bank funds. Instead, the eurozone may turn to emerging economies such as China and Brazil for help in underpinning its sickly bond market.
"Further work is still needed and that is why we will take the decisions in the follow-up eurozone summit," European Council President Herman Van Rompuy said after chairing 12 hours of talks.
He indicated that Italy, the eurozone state now in the markets' firing line, had been told to come up with a more convincing plan to implement structural economic reforms.
"Between now and Wednesday, some members of the European Council will have to convince colleagues their country is implementing the promised measures fully," Van Rompuy said.
Italian Prime Minister Silvio Berlusconi said he expected to call a cabinet meeting to discuss measures to boost growth, as Italy came under mounting pressure to step up reforms to restore market confidence.
Sarkozy acknowledged France's proposal to multiply the firepower of the eurozone's rescue fund by turning it into a bank and letting it borrow from the ECB would not fly for now because neither Germany nor the central bank accepted it.
"No solution is viable if it does not have the support of all the European institutions," the French leader told a joint news conference with German Chancellor Angela Merkel.
Merkel said only two options remained on the table for leveraging the 440 billion euro (US$600 billion) European Financial Stability Facility, and neither involved drawing on the central bank.
Officials said the emerging solution would combine using the EFSF to provide partial guarantees to buyers of new Italian and Spanish bonds, while also creating a special purpose vehicle to attract funds from major emerging countries that could guarantee bonds in the secondary market.
Leaders endorsed a broad framework for recapitalising European banks, which regulators say need between 100 and 110 billion euros to cope with likely losses on Greek and other eurozone sovereign bonds.
But final decisions were deferred until a second summit tomorrow and sharp differences remain over the size of losses private holders of Greek government bonds will have to accept.
French President Nicolas Sarkozy backed down in the face of implacable German opposition to his desire to use unlimited European Central Bank funds. Instead, the eurozone may turn to emerging economies such as China and Brazil for help in underpinning its sickly bond market.
"Further work is still needed and that is why we will take the decisions in the follow-up eurozone summit," European Council President Herman Van Rompuy said after chairing 12 hours of talks.
He indicated that Italy, the eurozone state now in the markets' firing line, had been told to come up with a more convincing plan to implement structural economic reforms.
"Between now and Wednesday, some members of the European Council will have to convince colleagues their country is implementing the promised measures fully," Van Rompuy said.
Italian Prime Minister Silvio Berlusconi said he expected to call a cabinet meeting to discuss measures to boost growth, as Italy came under mounting pressure to step up reforms to restore market confidence.
Sarkozy acknowledged France's proposal to multiply the firepower of the eurozone's rescue fund by turning it into a bank and letting it borrow from the ECB would not fly for now because neither Germany nor the central bank accepted it.
"No solution is viable if it does not have the support of all the European institutions," the French leader told a joint news conference with German Chancellor Angela Merkel.
Merkel said only two options remained on the table for leveraging the 440 billion euro (US$600 billion) European Financial Stability Facility, and neither involved drawing on the central bank.
Officials said the emerging solution would combine using the EFSF to provide partial guarantees to buyers of new Italian and Spanish bonds, while also creating a special purpose vehicle to attract funds from major emerging countries that could guarantee bonds in the secondary market.
Leaders endorsed a broad framework for recapitalising European banks, which regulators say need between 100 and 110 billion euros to cope with likely losses on Greek and other eurozone sovereign bonds.
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