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Friday 2 December 2016

Germany won't agree to increase in bailout fund

Published 23/01/2012 | 05:00

GERMAN Finance Minister Wolfgang Schaeuble last night insisted his country would not countenance a much-demanded increase in the size of the eurozone's permanent rescue fund, setting an ominous stage for today's meeting of eurozone finance ministers.

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The comments came amid signs of progress in high-octane negotiations to write down Greece's debts, with Greece's private creditors' chief negotiator saying talks had reached a "crossroads" and he was "quite hopeful" about the outcome.

Clamour about the need to raise the size of the EFSF has been building as markets baulked at the inability of the €500m fund to deal with a crisis in a country like Italy, which has €1.9trillion of debt.

Italian Prime Minister Mario Monti led calls for the fund to be increased weekend, telling German newspaper 'Der Spiegel' that he wanted the fund to be doubled.

The piece also intimated that the European Central Bank was on board with plans to enlarge the EFSF to about €750bn.

But Mr Schaeuble moved swiftly to diffuse hope of an imminent rise in the EFSF, telling Germany's public broadcaster ARD that he was "sticking to what was agreed in December [€500bn]".

Confidence

"In March, we will check whether that is sufficient," he added. "We are not yet out of the woods but over the last few weeks, many (debt) auctions have shown that the markets are beginning to regain confidence."

That confidence may be boosted further if Greece finally agrees a deal with its private bondholders this week. Banks and other financial institutions are likely to have to write off at least 50pc of the money they're owed by Greece.

Finance Minister Michael Noonan said it was a "fatal" mistake to ask private bondholders to shoulder losses.

"When you lend out money, the first question is: will I get it back?" he said, adding that the situation had "driven the markets crazy".

The Greek progress is likely to dominate tonight's finance ministers' meeting, a week before eurozone leaders gather to consider further efforts to offset the financial crisis.

The ministers may also return to the familiar topic of eurobonds, an arrangement that would allow eurozone countries to collectively raise money from the debt markets.

(Additional reporting by Reuters)

Irish Independent

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