News posted by www.newsinfoline.com
European Union finance ministers promised to do everything to defend the euro from the "wolfpack" of the financial markets at the start of talks on Sunday on emergency measures to stop Greece's debt crisis spreading.The European Commission will present the ministers with a proposal on a stabilisation mechanism intended to provide a multi-billion euro safety net for other euro zone countries with bloated public finances such as Portugal, Spain or Ireland.Bond yields of these countries have been rising sharply -- increasing the risk premium investors carry to hold their debt -- on market concern they may be next to need assistance.The threat that markets would turn against the three states next triggered a call from euro zone leaders on Friday to come up with a solution to the crisis before markets open on Monday."We now see ... wolfpack behaviours, and if we will not stop these packs, even if it is self-inflicted weakness, they will tear the weaker countries apart," Swedish Finance Minister Anders Borg told reporters on arrival for the meeting.Greece, which had a budget deficit of 13.6-14.1 percent of GDP in 2009 and debt of more than 115 percent of GDP, has already secured a 110 billion euro ($148 bln) three-year loan package from the euro zone and the International Monetary Fund after its costs of borrowing rose to unsustainable levels."We ... need resources to stop the market turmoil. If this goes on for more than a couple of days it will be very, very problematic for the recovery," Borg said.BROADER USE FOR EXISTING MECHANISMEU sources said the European Commission would ask the finance ministers to extend an existing aid mechanism for non-euro zone countries to nations in the single-currency bloc.The Commission would also call for an existing amount available under the mechanism, called the balance-of-payments facility, to be raised by 60 billion euros, they said.The maximum available now is 50 billion euros. One source suggested the top-up money could be used to borrow up to 10 times that amount on markets but others said this was incorrect.The 60 billion top-up would be guaranteed by all 27 EU states and loans paid out to any of them would carry conditions set by the International Monetary Fund, one EU source said.Funds previously raised via the facility are rated AAA -- top investment grade -- by major credit ratings agencies. As an extra measure for euro zone countries only, the Commission will propose a mechanism of intergovernmental loans, the source said.The European Central Bank was also expected to play a role in the stabilisation efforts, but it was not yet clear what."The ECB is an independent institution of the European Union so the ECB should certainly play a role, but according to its rules and...political leaders should not influence the decisions of the ECB," said Luxembourg Finance Minister Luc Frieden.A similar mechanism was successfully used in the cases of Latvia, Romania and Hungary after the pool of money available was increased to 50 billion euros last year.The mechanism could be used on the basis of an EU law which says that if a member state is in difficulties caused by circumstances beyond its control, EU ministers may grant it financial assistance under certain conditions.The ministers' meeting follows a summit of euro zone leaders on Friday, which asked for a European Stabilisation mechanism to be ready before markets open on Monday. Some economists said the move would cure the symptoms, rather than the disease.Morgan Stanley said in a researcc note to clients that governments finally appeared to be rising to the challenge."But ... a stabilisation fund is just buying time for distressed borrowers," it said. "If yet another rescue mechanism isn't followed by aggressive austerity measures, the problem just continues to fester -- and could eventually spread even wider."(Additional reporting by Julien Toyer, Justyna Pawlak, Bate Felix, John O'Donnell)
News posted by www.newsinfoline.com
Click here to read more news from www.newsinfoline.com
Please follow our blogs
newsinfolinephotogallery
prabugallery
newsinfolinephotogallery1
photogallery1
No comments:
Post a Comment