Thursday 23 November 2017

Weber: EU rescue fund can be increased if needed

European Central Bank council member Axel Weber said governments can increase the size of the European Union-led bailout fund if necessary to restore confidence in the euro.

“Seven hundred and fifty billion should be enough to assure the markets,” Weber said at the German embassy in Paris late yesterday. “If not, it will have to be increased.”

Contagion from Europe’s sovereign debt crisis is spreading to Spain, sparking concern that the rescue fund set up in May isn’t large enough to rescue the euro region’s fourth-largest economy.

The premium on Spanish debt over German bunds rose to a euro-era record yesterday and Portugal’s bonds fell on concern they will follow Ireland and Greece in asking for a bailout.

Spain’s economy is almost twice the size of Portugal, Greece and Ireland combined. Deputy Finance Minister Minister Jose Manuel Campa said in an interview yesterday the country’s funding position for the rest of the year is “comfortable.”

The yield on Spain’s 10-year government bond was unchanged at 5.06pc at 8:44am in London. The euro was also little changed at $1.3340.

Weber, who has said the ECB needs to start withdrawing some of its emergency stimulus measures next year, said governments will “do what is necessary to see the euro maintained.”

Euro survival

The European Union and the International Monetary Fund established the €750bn fund in May after Greece’s near-default threatened the survival of the euro.

Klaus Regling, who runs the largest part of the fund, told Bild- Zeitung in an interview published today that it’s large enough for all member states.

Weber, a leading candidate to take over from Jean-Claude Trichet as head of the ECB next year, backed German government proposals to create a permanent crisis-resolution mechanism once the bailout fund expires in 2013.

“In order not to distort incentives for investors, private creditors shouldn’t be relieved of their responsibility,” said Weber, who heads Germany’s Bundesbank.

Future aid for euro- member states should be tied to “strict conditions” and only be used “when the stability of the monetary union as a whole is in danger,” he said.

Ireland on November 21 applied to the EU for a rescue to bail out its banking system. Weber said the ECB “welcomes” Ireland’s request for help and is “confident” the package will help stabilise the country’s financial system.


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