Monday

13th Jul 2020

Euro-countries seek compromise on bail-out funds

  • Finnish PM Katainen and guests at the Lapland retreat (Photo: FinnishGovernment)

Eurozone countries are inching towards an agreement at the end of the week on raising the firepower of two bail-out funds to some €740 billion, with a higher amount deemed unrealistic given Germany and Finland's opposition.

Under the deal outlines, the temporary European Financial Stability Facility would be allowed to run in parallel for another year alongside the permanent European Stability Mechanism to be established on 1 July.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"Any other move would never fly in the German parliament, even this one is tricky," German centre-right MEP Elmar Brok told this website on Saturday (24 March).

The EU commission last week circulated three ideas on how to increase the joint firepower of the two funds, currently capped at €500 billion, suggesting €940 billion as preferred option.

The middle ground - which Germany and other reluctant countries such as Finland may agree to on Friday during a meeting of EU finance ministers in Copenhagen - would subtract the €200 billion already committed by the EFSF to the Greek, Portuguese and Irish bail-outs.

"We're a bit sceptical how big the rescue fund should be," Finnish Prime Minister Jyrki Katainen told reporters on Saturday during a meeting he organised in Lapland with a handful of EU ministers and bankers.

"The firewall must be high enough, but not too high, which could destroy the confidence of the sustainable countries," he added, in reference to Finland's triple A rating - shared by only three other eurozone countries: Germany, the Netherlands and Luxembourg.

The European Central Bank, who sent German official Joerg Asmussen to the Lapland retreat, insisted that the firewall needs to be increased even though markets have calmed down for the moment.

"The ECB's position on this is clear. Even if the crisis is now a little bit calmer, we still think it's necessary to increase the European firewalls (so) that our international partners at the G20 will also do their (part)," Asmussen said.

Berlin so far has maintained that since borrowing costs for Italy and Spain have gone down and market confidence is returning after the ECB injected €1 trillion in cheap bank loans, there is no more need to commit extra money to the bail-out funds.

But EU economics commissioner Olli Rehn said there was "no room for complacency," adding: "We are for the moment in a milder recession, but it can be short-lived."

The same message came from Belgian finance minister Steven Vanackere, who pointed out that even if his country's borrowing costs dropped from 6 to 3.2 percent, it does not mean the need for a strong firewall is gone.

"Portugal dropped from 14 to 10 percent, which is still too high. Just because Belgium is distant from the firewall now, it doesn't mean we don't support an increase. We need a strong, convincing, credible firewall," he said during the Brussels Forum, a conference organised by the German Marshall Fund, a think-tank.

Klaus Regling, another German official in charge of the temporary EFSF, also said in an interview with Focus magazine published on Monday: "The majority of market participants do not believe in the end of the crisis and expect further ratings downgrades of states this year."

"More money would actually further calm the markets. Whether it's right or wrong, it is a fact. Big figures in the shop window create calm," he added.

IMF: No money for Greece until Europe boosts its firewall

One of the many loose ends to the Greek bail-out agreed Tuesday is the lack of a firm commitment from the International Monetary Fund, pending a decision by eurozone leaders next week to merge the firepower of two bail-out funds.

Berlin still against boosting eurozone firewall

Germany has indicated it remains against boosting the eurozone's bail-out funds, despite it being the expected quid pro quo for the Berlin-pushed 'fiscal compact' - but its position may change after a key vote in the Bundestag end of February.

Michel lays out compromise budget plan for summit

Ahead of expected tense discussions next weekend among EU leaders, European Council president Charles Michel tries to find common ground: the recovery package's size, and grants, would stay - but controls would be tougher.

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

EU plans tougher checks on foreign takeovers

The EU and its member countries are worried that foreign powers, such as China and its state-owned companies will take advantage of the economic downturn and buy up European firms

News in Brief

  1. Croatia opens for US tourists, defying EU ban
  2. Poll: only 61% of Germans would get Covid-19 vaccine
  3. UK to spend €788m on new UK-EU border control system
  4. Berlin wants first use of EU cyber sanctions on Russia
  5. Erdogan warns neighbours over hydrocarbon reserves
  6. Bulgaria: political crisis amid anti-corruption protests
  7. Pope and Turkish-German leader join Hagia Sophia protest
  8. France and UK create joint migrant intelligence unit

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

Stakeholders' Highlights

  1. UNESDANext generation Europe should be green and circular
  2. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  3. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  4. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  5. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  6. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis

Latest News

  1. Poland's EU-battles to continue as Duda wins tight vote
  2. EU 'in-person' summit plus key data privacy ruling This WEEK
  3. Let's have positive discrimination for EU stagiaires
  4. We need to do more for our small and medium-sized enterprises
  5. Romania's virus surge prompts queues and new worries
  6. Michel lays out compromise budget plan for summit
  7. Border pre-screening centres part of new EU migration pact
  8. EU 'failed to protect bees and pollinators', report finds

Join EUobserver

Support quality EU news

Join us