European Leaders Rule Out ECB Help in Boosting Fund2
Bank capital needs — estimated at 100 billion euros by a person familiar with the deliberations — will be met first by banks themselves, then by national governments, the European officials agreed.
Only when national efforts fail can governments tap the main rescue fund, the 440 billion-euro European Financial Stability Facility, for cash to channel to banks.
“What I can tell you is that this only will happen under strict conditions,” Dutch Prime Minister Mark Rutte said.
Germany achieved one of its main summit aims,tiffany outlet defeating French efforts to bulk up the rescue fund by enabling it to borrow potentially limitless sums from the independent central bank. Policy makers are headed toward using the EFSF to guarantee government bond sales as a way to extend its reach. A second option is to set up an EFSF-insured fund that would seek outside investment in troubled bonds.
Expanding EFSF
“We have discussed options for increasing the firepower of the EFSF,” European Commission President Jose Barroso said. “I’m sure that progress can be confirmed on Wednesday.”
The goal is to complete the technical details within 24 hours, a European official said. The next summit will consider the two options as well as ways of getting the IMF to boost its involvement, the official told reporters. A separate statement called for “adequate” IMF resources with contributions from surplus countries such as China.
“Is it possible to get some extra funding from IMF, from BRIC countries for instance,” said Finland’s Jyrki Katainen.
Italy, with debt of 119 percent of gross domestic product, came under pressure to find more savings to be eligible for European help in fending off speculators.
Merkel on Italy
German Chancellor Angela Merkel made clear that Italy cannot count on unrestricted European support in what she called a “conversation among friends” with Italian Prime Minister Silvio Berlusconi.
“Confidence won’t result merely from a firewall,” Merkel said. “Italy has great economic strength, but Italy does also have a very high level of debt and that has to be reduced in a credible way in the years ahead.”
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