EC President admits investors not buying rescue plan
Published 04/08/2011 | 12:01
European Commission President Jose Manuel Barroso has admitted that last month’s plan to save the continent from a debt crisis following the second Greek bailout has failed to convince investors.
However, he stopped short of admitting his intervention this week to push leaders to endorse changes to the new plan is related to Italy and Spain’s current situation with their cost of borrowing coming close to bailout levels.
“Whatever the factors behind the lack of success, it is clear that we are no longer managing a crisis just in the euro-area periphery,” he said in a letter to the 17 eurozone leaders.
He also urged EU leaders to reform the European Financial Stability Facility (EFSF bailout fund) as soon as possible in an effort to settle bond markets.
Leaders last month agreed to give the EFSF powers to intervene in secondary bond markets and to pump money into troubled banks through government loans to countries.
However, EU governments have yet to endorse the measures at a national level.
Mr Barroso warned that the "bold decisions" taken on the Greek package and on the increased flexibility of the EFSF are "not having their intended effect on the markets".
His comments come ahead of a statement from the European Central Bank later today which is expected to hold interest rates but comment further on the eurozone crisis.
In the past two days, the cost of borrowing for both Italy and Spain is now over 6pc – 7pc is considered bailout territory.
Last month, eurozone leaders agreed a new €109bn bailout package for Greece and also agreed the increased powers for the EFSF which will replace the current European Stability Mechanism in 2013.