Saturday

25th Mar 2023

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

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

"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.

'Final warning' to act on climate change, warns IPCC

The United Nations's report — synthesising years of climate, biodiversity, and nature research — paints a picture of the effects of global warming on the natural world, concluding there is "no time for inaction and delays."

Opinion

EU's new critical raw materials act could be a recipe for conflict

Solar panels, wind-turbines, electric vehicle batteries and other green technologies require minerals including aluminium, cobalt and lithium — which are mined in some of the most conflict-riven nations on earth, such as the Democratic Republic of Congo, Guinea, and Kazakhstan.

Latest News

  1. EU's new critical raw materials act could be a recipe for conflict
  2. Okay, alright, AI might be useful after all
  3. Von der Leyen pledges to help return Ukrainian children
  4. EU leaders agree 1m artillery shells for Ukraine
  5. Polish abortion rights activist vows to appeal case
  6. How German business interests have shaped EU climate agenda
  7. The EU-Turkey migration deal is dead on arrival at this summit
  8. Sweden worried by EU visa-free deal with Venezuela

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  2. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  3. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence
  4. Nordic Council of MinistersCSW67: The Nordics are ready to push for gender equality
  5. Promote UkraineInvitation to the National Demonstration in solidarity with Ukraine on 25.02.2023
  6. Azerbaijan Embassy9th Southern Gas Corridor Advisory Council Ministerial Meeting and 1st Green Energy Advisory Council Ministerial Meeting

Join EUobserver

Support quality EU news

Join us