Germany and France at odds over bailout fund plan
world economic forum
EUROPE'S finance chiefs attempted to reassure anxious global business leaders yesterday in Davos, but further divisions emerged on the crucial issue of boosting the bailout fund.
French finance minister Francois Baroin said that the fund needed to be increased in order to calm markets, but his German counterpart, Wolfgang Schaeuble, indicated that his government was not prepared to do so.
Germany, as Europe's biggest economy, would face the biggest bill.
"We must not give the wrong incentives," Mr Schaeuble said. "You can make any figure. It will not work if the real problems will not be solved."
Both finance chiefs, together with Spanish economy minister Luis de Guindos Jurado and European Monetary Affairs Commissioner Olli Rehn, agreed that the idea of issuing eurobonds backed jointly by all eurozone governments was a non-starter for now.
They didn't rule out the possibility that such bonds could be introduced once confidence in Europe's public finances was restored, with Mr Guindos calling that a "final target".
Mr Schaeuble said eurobonds would provide bad incentives by allowing debt-ridden countries to "spend money you don't have on the bill of others".
IMF managing director Christine Lagarde, speaking to reporters in Davos, kept up pressure on the Europeans to boost their financial firewalls after making a strong plea in Berlin on Monday.
There were "big worries" around the world about what the eurozone would do going forward, she said.