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28th May 2022

Confusion reigns over possible eurozone bailout plan

  • The ECB denied the existence of a rescue fund (Photo: EUobserver)

A summit of EU leaders in Brussels on Friday (20 March) was the scene of some confusion as to whether member states have agreed the bones of a eurozone bailout plan.

A senior German politician, Otto Bernhardt, member of the German chancellor's CDU party, told Reuters early on Friday that eurozone finance ministers agreed at a recent meeting the main components of a eurozone bailout plan that would see richer countries contribute to a special reserve fund to which struggling eurozone members could apply.

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However, German finance minister Peer Steinbrück was somewhat cryptic when asked about the funds existence at a press conference later in the day. "I can't confirm such a meeting or such conclusions," adding that no eurozone member currently had difficulties in meeting debt payments.

"In the unlikely case that it did happen, the eurozone would be ready for action," he said.

Mr Bernhardt told Reuters that the fund has already been set up with the European Central Bank and is ready to help eurozone countries "at a moments notice", continuing that "we won't let anyone go bust."

"We are in a position to act within 24 hours. The ECB would take immediate action," he said. "The ECB can make an unlimited amount of money available."

Ireland, which Mr Bernhardt said was in "the worst situation of all" immediately denied the existence of such a plan.

"Finance ministers didn't discuss anything to do with a rescue package for members of the euro zone" Irish foreign minister Micheal Martin told Irish radio on Friday morning.

A German spokesperson said "there is no such plan" and that Mr Bernhardt said he had been misinterpreted.

European Commission president Jose Manuel Barroso said: "I am not aware of this kind of decision."

But Mr Bernhardt was quite precise in the details he gave to Reuters, speaking of a quid pro quo arrangement on corporate tax, something that has also been previously reported in Irish newspapers.

"We would look very closely at past sins," Mr Bernhardt said. "We will not tolerate there being low-tax countries like Ireland for example. We will insist on a minimum corporate taxation rate."

Germany has long been irritated by Ireland's low corporate tax rate, standing at 12 percent.

However, sweetners to business formed the backbone of Ireland's Celtic Tiger years attracting huge amounts of foreign investment and Brian Cowen's government wants to continue to use it to get the country – hit by a falling property market and plummeting exports - out of the financial doldrums.

In a speech delivered to Microsoft's headquarters in Brussels on Thursday (19 March), Mr Cowen said the government plans "highly favourable business supports, tax regime and infrastructural supports," in a bid to turn Ireland into a "smart" economy.

Talk of a eurozone bailout have cropped up persistently in recent weeks.

Earlier this month at a breakfast meeting at the European Policy Centre think-tank, economy commissioner Joaquin Almunia said the EU did have plan to help struggling eurozone states but refused to elaborate on the details.

"It is not clever to talk in public about this solution".

Last month, Mr Steinbrueck said that richer eurozone countries may have to come to the aid of single currency nations that are having problems.

"The euro-region treaties do not foresee any help for insolvent states, but in reality the others would have to rescue those running into difficulty," he said on 17 February.

Meanwhile, the European Central Bank on Friday denied the existence of a rescue fund.

"The reported information is for the ECB untrue," a spokeswoman for the Frankfurt-based central bank said, reports Bloomberg news agency. The euro dropped after the comment was published.

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