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European Union finance ministers are discussing whether to activate a financial mechanism that would involve the EU's executive Commission raising funds on international markets and on-lending them to member states who need protection against Greece's spreading debt problems.Following are analysts' comments on the EU's efforts to manage the expanding crisis and whether such a fund, which would be an expansion of an existing EU Commission lending facility, will be effective at protecting the euro and euro zone stability.ERIK NIELSEN, CHIEF EUROPEAN ECONOMIST, GOLDMAN SACHS"They'll try to finesse the messy process of getting help to Greece. They may try to pool their money more formally, but it'll still have to come from individual country borrowing (and hence national approval processes) as opposed to a common bond."Also, there won't be any money for unconditional disbursement. I suspect that the governance stuff could refer to punishment of those who slip on their fiscal policies, e.g. suspension of payments from the structural funds. There will be nothing in terms of surrendering fiscal authority or other dramatic stuff.""All in all this is good news, but it is unlikely in itself to calm markets; it's all too "slow-burner" stuff. But what it will do is to provide sort of a fig leaf for the ECB to introduce exceptional measures, just like the Greek package (and the ECB's own "approval" of it) made it possible to suspend the ratings agency from determining access for Greek sovereign securities. I am not sure what exactly the next ECB measures will be, but I would rather suspect an announcement probably already tomorrow, maybe along with the Ecofin decision, on additional measures."MORGAN STANLEY RESEARCH"Overnight, euro area leaders have decided to put together an emergency stabilisation fund for EMU countries. The details of this stabilisation fund will be finalised before the market opens on Monday."At this stage, we don't know much about the details of the planned stabilisation fund. But we believe that this is an important move that could help stabilise the euro area periphery, as well as the euro area banking sector and the money markets. Risky assets would likely respond positively too. We are less convinced, however, that the stabilisation will be seen as positive for the euro or for Bunds. The market reaction, of course, will crucially depend on the details of the announcement."By putting in place additional safeguards for the euro area financial system, governments finally appear to be rising to the challenge of the sovereign debt crisis. But, like the measures taken before - for the benefit of Greece - a stabilisation fund is just buying time for distressed borrowers. The fiscal policy action taken in these countries during this "extra time" is essential. If yet another rescue mechanism isn't followed by aggressive austerity measures, the problem just continues to fester - and could eventually spread even wider."TIM FOX, EMIRATES BANK IN DUBAI"In the coming week the markets will be looking for some evidence that the authorities are finally getting to grips with the situation. The first funds from the 110 billion euro package should start to flow to Greece, and it has been made clear that they will be sufficient for the May 19 deadline (to refinance some of its debt)."The EU has also announced that it plans to set up a stabilization fund before the markets open tomorrow. The details of this will be fleshed out at an emergency ECOFIN meeting due today, and is likely to revolve around a common fiscal fund pooling resources from individual states. While this might be a worthy step, it is not likely to address the markets' near-term concerns. The ECB passed on an opportunity last week to act forcefully to stabilize market conditions, with the result that the EUR fell sharply further again on Friday."
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