Wednesday

1st Feb 2023

Berlin still against boosting eurozone firewall

  • The Bundestag is to vote on 27 February on the second Greek bail-out (Photo: BriYYZ)

Germany has indicated it remains against boosting the eurozone's bail-out funds, despite it being the expected quid pro quo after 24 other EU member states signed up to the Berlin-pushed 'fiscal compact treaty - but its position may change after a key vote in the Bundestag end of February.

Eurozone finance ministers meeting in Brussels on Monday (20 February) are set to discuss the possibility of raising the ceilings of two bail-out funds, the temporary European Financial Stability Facility (EFSF) and the upcoming permanent European Stability Mechanism (ESM).

Read and decide

Join EUobserver today

Become an expert on Europe

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

... or subscribe as a group

EU leaders in December agreed to come back to the issue on 1-2 March during a summit, pending the agreement on an inter-governmental treaty on fiscal discipline, demanded by Germany.

EUobserver understands that Germany is still against expanding the funds and is saying it will maintain this position in March, arguing that "market conditions have improved" since December and there is no need to increase the funds' firepower.

A compromise solution, as indicated by the German member of the European Central Bank, Joerg Asmussen, would be to scrap the provision capping their joint ceiling at €500bn. The EFSF - which was used in the Portuguese and Irish bail-outs and should be used for the second Greek aid package - would still have some €250bn left when the ESM comes into force, on 1 July.

"In this way, we could reach €750 billion," Asmussen told the Financial Times Deutschland, noting the ECB would support this approach.

Asmussen explained that it was very unlikely for emerging countries to agree to boost the resources of the International Monetary Fund at a meeting of G20 finance ministers later this month in Mexico City unless the eurozone signals it is willing to contribute first.

"Many non-European G20 states expect the Europeans to first build their own firewall and raise it, rather than other funds flowing into it again from outside Europe," Asmussen said.

But even €750bn would be insufficient to stem the eurozone debt crisis, one economist said.

"The €750bn figure is more than €500bn and it would send a stronger message, but its still not sufficient," Carsten Brzeski from ING Bank told this website.

He pointed out that it would take €1 trillion for Italy and Spain - the eurozone's third and fourth largest economies - to stay outside the markets if their borrowing costs reached bail-out territory.

The German position may change after a key vote on 27 February when the second Greek bail-out will have to pass through the Bundestag, he added. "It would be premature and overburdening national legislation to say 'here is the second Greek package plus we want to increase the EFSF/ESM ceiling," Brzeski said.

This is also consistent with Germany's strategy of always "postponing and taking baby steps" when confronted with demands for more cash, he added.

Eurozone bail-out fund loses triple-A rating

The Eurozone's bail-out fund was downgraded by one notch to AA+ by the US ratings agency Standard & Poor's on Monday - a move likely to put an extra financial burden on contributing nations.

Merkel: Eurozone crisis not over yet

Merkel has said the eurozone crisis is "not over" yet, even as investor confidence seems to be returning to troubled euro-countries.

Germany prompts cancellation of euro summit

A meeting of eurozone leaders planned for Friday after the EU summit in Brussels has been cancelled because Germany is still saying No to increasing the firepower of eurozone bail-out funds.

Opinion

More money, more problems in EU answer to US green subsidies

Industrial energy-intense sectors, outside Germany and France, will not move to the US. They will go bust, as they cannot compete in a fragmented single market. So to save industry in two member states, we will kill the rest?

Latest News

  1. Hungary blames conspiracy for EU corruption rating
  2. Democracy — is it in crisis or renaissance?
  3. EU lobby register still riddled with errors
  4. Polish backpedal on windfarms put EU funds at risk
  5. More money, more problems in EU answer to US green subsidies
  6. Study: EU electricity transition sped into high gear in 2022
  7. Russia and China weaponised pandemic to sow distrust, MEPs hear
  8. Frontex to spend €100m on returning migrants this year

Stakeholders' Highlights

  1. Party of the European LeftJOB ALERT - Seeking a Communications Manager (FT) for our Brussels office!
  2. European Parliamentary Forum for Sexual & Reproductive Rights (EPF)Launch of the EPF Contraception Policy Atlas Europe 2023. 8th February. Register now.
  3. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains
  4. Forum EuropeConnecting the World from the Skies calls for global cooperation in NTN rollout
  5. EFBWWCouncil issues disappointing position ignoring the threats posed by asbestos
  6. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal

Join EUobserver

Support quality EU news

Join us