EU monetary affairs commissioner Olli Rehn has said talks are under way to expand the region’s bailout fund, the European Financial Stability Facility (EFSF), so that it could insure trillions of euro in debt as it seeks to get on top of the euro zone financial crisis.
The International Monetary Fund annual meetings wrapped up in Washington yesterday with widespread concern over the euro zone sovereign debt crisis, but no immediate consensus on the solution.
Greece insisted it would not default despite widespread pessimism among attendees.
EU competition commissioner Joaquin Almunia today said European leaders will eventually take the right decisions on the sovereign debt crisis. "In the end Mrs Merkel, Mr Sarkozy will take the decisions, knowing what is at stake," he said in an interview. "I'm sure of it, the problem is that they shouldn't wait too long."
Meanwhile European stocks climbed this morning, erasing earlier losses, as finance ministers and central bankers urged policy makers in Europe to intensify efforts to contain the region's debt crisis.
BNP Paribas, France's biggest lender, led a rally in bank shares. Dexia jumped 7.3 per cent amid a report the Belgian bank is ready to sell €20 billion of bond assets.
The benchmark Stoxx Europe 600 Index rallied 1.8 per cent to 220.08 at 10 a.m. in London, rebounding from an earlier loss of as much as 1.4 per cent.
More than $3.5 trillion was wiped from equity values last week.
German chancellor Angela Merkel said last night in an interview on German television that euro zone leaders must erect a firewall around Greece to avert a cascade of market attacks on other European states that would risk breaking up the currency area.
Expanding the powers of the region's rescue fund, the European Financial Stability Facility, as agreed by European leaders in July is necessary to avoid Greece's problems from spilling over to other countries, she said.
The fund's permanent successor, due to take effect in mid-2013, is needed "so we can in fact let a state go insolvent."
Meanwhile, Minister for Finance Michael Noonan, who was at the IMF meetings at the weekend, confirmed that AIB had applied to negotiate a higher salary than the €500,000 cap set on bankers’ pay for its new chief executive.
Mr Noonan also indicated yesterday that the budgetary adjustment for next year would probably have to be slightly bigger than the €3.6 billion indicated thus far.
Participants at the IMF meetings said they were waiting for the ratification of the plan agreed on July 21st by the euro zone, particularly by the German Bundestag this week, before starting serious negotiations on increasing the rescue fund’s firepower or asking for a bigger writedown in private sector holdings of Greek debt.
Euro zone officials hinted more strongly that the EFSF, the €440 billion euro zone rescue fund that will be strengthened by the July 21st agreement, could leverage its size by insuring the issuance of debt and perhaps linking up with the European Central Bank.
However, ECB officials have indicated resistance to the proposal.
Despite many private conversations about an inevitable sovereign debt restructuring in Greece, the official line was that default was unthinkable and implementation of the July 21st deal was the only focus.
Evangelos Venizelos, Greece’s finance minister, said the country would not default. “Greece is and will always be in the euro,” he said. “Greece is never going to default because that would have been catastrophic for the euro area and for many other countries beyond the euro area.”
Pressure mounted over the weekend for EU leaders to take decisive action to resolve the crisis.
“The threat of cascading default, bank runs and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally,” US treasury secretary Timothy Geithner said in his address to the IMF’s oversight committee in Washington. “Decisions as to how to conclusively address the region’s problems cannot wait until the crisis gets more severe.”
Mr Rehn said there was “increasing political will” among European leaders to act swiftly.
Bloomberg reported that European finance officials would this week consider moving forward the establishment of a European Stability Mechanism (ESM) with €500 billion in working capital to help troubled European economies.
The ESM was originally scheduled to come into existence in July 2013.
IMF managing director Christine Lagarde said it was “ready and it will deliver on any type of resources necessary and available to all members . . . By resources I mean everything that the fund can deliver, from policy advice, from being the trusted adviser and the facilitator, to organising facilities that are needed.”
IMF officials emphasised the need for euro zone countries to ratify the July 21st agreement, which has so far been approved by only six of 17 countries, before they begin redefining the mandate of the EFSF.
Antonio Borges, head of the European department of the IMF, told reporters it was “relatively reassured” about Ireland and said the Irish Government had been “remarkable in its performance . . .
“Things are moving exactly in the right direction . . . confidence is restored, interest rates are beginning to come down, foreign investors are interested in investing in Ireland.”
However, he cautioned that a “big slowdown in Europe” could lead to “additional difficulties” for Ireland.
Source: www.irishtimes.com
The International Monetary Fund annual meetings wrapped up in Washington yesterday with widespread concern over the euro zone sovereign debt crisis, but no immediate consensus on the solution.
Greece insisted it would not default despite widespread pessimism among attendees.
EU competition commissioner Joaquin Almunia today said European leaders will eventually take the right decisions on the sovereign debt crisis. "In the end Mrs Merkel, Mr Sarkozy will take the decisions, knowing what is at stake," he said in an interview. "I'm sure of it, the problem is that they shouldn't wait too long."
Meanwhile European stocks climbed this morning, erasing earlier losses, as finance ministers and central bankers urged policy makers in Europe to intensify efforts to contain the region's debt crisis.
BNP Paribas, France's biggest lender, led a rally in bank shares. Dexia jumped 7.3 per cent amid a report the Belgian bank is ready to sell €20 billion of bond assets.
The benchmark Stoxx Europe 600 Index rallied 1.8 per cent to 220.08 at 10 a.m. in London, rebounding from an earlier loss of as much as 1.4 per cent.
More than $3.5 trillion was wiped from equity values last week.
German chancellor Angela Merkel said last night in an interview on German television that euro zone leaders must erect a firewall around Greece to avert a cascade of market attacks on other European states that would risk breaking up the currency area.
Expanding the powers of the region's rescue fund, the European Financial Stability Facility, as agreed by European leaders in July is necessary to avoid Greece's problems from spilling over to other countries, she said.
The fund's permanent successor, due to take effect in mid-2013, is needed "so we can in fact let a state go insolvent."
Meanwhile, Minister for Finance Michael Noonan, who was at the IMF meetings at the weekend, confirmed that AIB had applied to negotiate a higher salary than the €500,000 cap set on bankers’ pay for its new chief executive.
Mr Noonan also indicated yesterday that the budgetary adjustment for next year would probably have to be slightly bigger than the €3.6 billion indicated thus far.
Participants at the IMF meetings said they were waiting for the ratification of the plan agreed on July 21st by the euro zone, particularly by the German Bundestag this week, before starting serious negotiations on increasing the rescue fund’s firepower or asking for a bigger writedown in private sector holdings of Greek debt.
Euro zone officials hinted more strongly that the EFSF, the €440 billion euro zone rescue fund that will be strengthened by the July 21st agreement, could leverage its size by insuring the issuance of debt and perhaps linking up with the European Central Bank.
However, ECB officials have indicated resistance to the proposal.
Despite many private conversations about an inevitable sovereign debt restructuring in Greece, the official line was that default was unthinkable and implementation of the July 21st deal was the only focus.
Evangelos Venizelos, Greece’s finance minister, said the country would not default. “Greece is and will always be in the euro,” he said. “Greece is never going to default because that would have been catastrophic for the euro area and for many other countries beyond the euro area.”
Pressure mounted over the weekend for EU leaders to take decisive action to resolve the crisis.
“The threat of cascading default, bank runs and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally,” US treasury secretary Timothy Geithner said in his address to the IMF’s oversight committee in Washington. “Decisions as to how to conclusively address the region’s problems cannot wait until the crisis gets more severe.”
Mr Rehn said there was “increasing political will” among European leaders to act swiftly.
Bloomberg reported that European finance officials would this week consider moving forward the establishment of a European Stability Mechanism (ESM) with €500 billion in working capital to help troubled European economies.
The ESM was originally scheduled to come into existence in July 2013.
IMF managing director Christine Lagarde said it was “ready and it will deliver on any type of resources necessary and available to all members . . . By resources I mean everything that the fund can deliver, from policy advice, from being the trusted adviser and the facilitator, to organising facilities that are needed.”
IMF officials emphasised the need for euro zone countries to ratify the July 21st agreement, which has so far been approved by only six of 17 countries, before they begin redefining the mandate of the EFSF.
Antonio Borges, head of the European department of the IMF, told reporters it was “relatively reassured” about Ireland and said the Irish Government had been “remarkable in its performance . . .
“Things are moving exactly in the right direction . . . confidence is restored, interest rates are beginning to come down, foreign investors are interested in investing in Ireland.”
However, he cautioned that a “big slowdown in Europe” could lead to “additional difficulties” for Ireland.
Source: www.irishtimes.com
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