France and Germany head to head over scope of bailout fund
Source: Agencies |
October 24, 2011, Monday
|
Print Edition
Print Edition
FRANCE was lobbying yesterday to overcome German opposition to giving the European Central Bank a central role in bolstering the eurozone's bailout fund, arguing it was the only way to draw a definitive line under widening debt problems.
Setting a Wednesday deadline for a deal at a summit starting yesterday called to resolve the euro crisis, leaders were seeking agreement on a means to boost their 440 billion euro (US$610 billion) European Financial Stability Fund by enough to support the region's undercapitalized banks and stop the crisis hitting economies such as Italy and Spain.
Paris - with support from most of the 17 eurozone states, including Italy and Spain - argues the EFSF should be given a banking license, allowing the fund to leverage its lending capacity by tapping almost unlimited credit from the ECB's lending window.
Germany, fiercely protective of the independence of the Frankfurt-based ECB, has argued that using it to leverage the EFSF would violate its mandate. This has led to an unusually public disagreement between the two powers that normally chart the course for the bloc. The ECB also opposes taking on the role.
Finland and the Netherlands - which have emerged as hardliners opposed to the rising cost of eurozone bailouts - have sided with Germany. But a range of eurozone member states have rallied behind France.
"The French are not letting go of it, and insist on their idea. Their position has not changed," one European diplomat from a nation sympathetic to Paris's view said yesterday.
Jean-Claude Juncker, chairman of the euorzone's finance ministers group and prime minister of Luxembourg, acknowledged the diplomatic stalemate over the crisis was damaging for Europe. "The outside impression is disastrous," he said.
In an attempt to lay the issue to rest, German officials have said only two options for leveraging the EFSF remained on the table.
The first involves using the fund to guarantee a share of losses on eurozone bonds, allowing it reinforce investors' confidence while maximizing its resources. The second is bolstering its firepower via a special purpose vehicle capitalized by donors such as China or Brazil.
The prospect of allowing foreign nations to decide the fate of Europe has alarmed the European Commission, and this option appears unlikely to win through, not least because of the implications it has for European sovereignty.
France is insisting there are legal means to avoid the ECB's participation violating European Union rules against it directly financing governments.
A French source said: "The Germans are against any violation of the rules of the ECB, but this would not necessarily be incompatible. The ECB's participation would greatly increase the effectiveness of any solution."
The stumbling block remains that any deal must be acceptable to German public opinion and the country's parliament.
Setting a Wednesday deadline for a deal at a summit starting yesterday called to resolve the euro crisis, leaders were seeking agreement on a means to boost their 440 billion euro (US$610 billion) European Financial Stability Fund by enough to support the region's undercapitalized banks and stop the crisis hitting economies such as Italy and Spain.
Paris - with support from most of the 17 eurozone states, including Italy and Spain - argues the EFSF should be given a banking license, allowing the fund to leverage its lending capacity by tapping almost unlimited credit from the ECB's lending window.
Germany, fiercely protective of the independence of the Frankfurt-based ECB, has argued that using it to leverage the EFSF would violate its mandate. This has led to an unusually public disagreement between the two powers that normally chart the course for the bloc. The ECB also opposes taking on the role.
Finland and the Netherlands - which have emerged as hardliners opposed to the rising cost of eurozone bailouts - have sided with Germany. But a range of eurozone member states have rallied behind France.
"The French are not letting go of it, and insist on their idea. Their position has not changed," one European diplomat from a nation sympathetic to Paris's view said yesterday.
Jean-Claude Juncker, chairman of the euorzone's finance ministers group and prime minister of Luxembourg, acknowledged the diplomatic stalemate over the crisis was damaging for Europe. "The outside impression is disastrous," he said.
In an attempt to lay the issue to rest, German officials have said only two options for leveraging the EFSF remained on the table.
The first involves using the fund to guarantee a share of losses on eurozone bonds, allowing it reinforce investors' confidence while maximizing its resources. The second is bolstering its firepower via a special purpose vehicle capitalized by donors such as China or Brazil.
The prospect of allowing foreign nations to decide the fate of Europe has alarmed the European Commission, and this option appears unlikely to win through, not least because of the implications it has for European sovereignty.
France is insisting there are legal means to avoid the ECB's participation violating European Union rules against it directly financing governments.
A French source said: "The Germans are against any violation of the rules of the ECB, but this would not necessarily be incompatible. The ECB's participation would greatly increase the effectiveness of any solution."
The stumbling block remains that any deal must be acceptable to German public opinion and the country's parliament.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
