Thursday 19 April 2018

EU works on IMF-style lender

Angela Merkel: pushing for regulation to defend the euro Photo: Getty Images
Angela Merkel: pushing for regulation to defend the euro Photo: Getty Images

Tony Czuczka and Patrick Donahue

European leaders are in talks to establish a lender of last resort and limits on credit-default swaps to bolster the euro area and prevent a repeat of the Greek financial crisis.

Plans for what may become the European Monetary Fund and a German-French push to curb “speculators” using derivatives to bet against Greece’s debt are to be ready by June, officials in Berlin and Brussels said today.

German Finance Minister Wolfgang Schaeuble “believes we must learn from the crisis,” his spokesman Michael Offer told reporters in Berlin. Greece is “the trigger” for efforts to avoid similar crises in the future, he said.

German Chancellor Angela Merkel and her fellow European leaders are shifting from rhetoric in support of Greece to regulation as they seek to defend the euro and rally behind coordinated measures in the wake of the global financial crisis.

“Speculators and the markets should know that solidarity means something and that, if there’s a problem, we are there,” French President Nicolas Sarkozy said in Paris yesterday after talks with Greek Prime Minister George Papandreou.

“The sooner we say that and the more firmly we say that, the more rapidly we settle the problem.”

The euro strengthened and Greek bonds rose after Sarkozy’s comments. The currency shared by 16 nations added 0.2pc to $1.3649 at 1:20pm in Brussels.

The yield on the two-year Greek note fell 11 basis points to 4.78pc, while the yield on the five-year bond dropped 14 basis points to 5.83pc.

Luxembourg talks

Merkel, Sarkozy and Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of euro-area finance ministers, are jointly working on proposals to limit the use of derivatives in light of the Greek fiscal crisis, Merkel’s spokesman, Ulrich Wilhelm, said in Berlin. Merkel travels to Luxembourg tomorrow for talks with Juncker, he said.

Offer confirmed plans by Schaeuble, made in an interview with the Welt am Sonntag newspaper yesterday, for a euro-region institution similar to the International Monetary Fund to avoid another Greek crisis.

The EU said it plans a European Monetary Fund-type proposal by the end of June, a Commission spokesman said in a briefing in Brussels today. Development of the proposal is at a preliminary stage, he said.

“A currency union should and must itself be in a position to tackle crises that emerge,” Offer said. “The rules should be such that it limits assistance from outside, because that would signal a weakness in the currency union.”


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