More money
January 12, 2011
Following increased concerns that further eurozone countries will require a bail out, the European Commission president, Jose Manuel Barroso, on Wednesday called on member states to move quickly to increase the size of the EU's euro crisis fund.
He suggested that the European heads of government could decide to enlarge the 440-billion-euro ($570 billion) European Financial Stability Facility (EFSF) as early as their next meeting on February 4.
"We believe that the financing capacity must be reinforced, the scope of activities of the EFSF should be widened," Barroso said.
His comments came as Portugal succeeded in placing a new round of government bonds worth 1.25 billion euros, but only at high rates of interest. Portugal has continued to deny that it requires a rescue package similar to those which have been provided for Greece and Ireland.
But there are fears that Portugal, Spain and possibly Belgium and Italy may still need bail-outs. Analysts argue that the fund needs to be bigger to calm market concerns.
The crisis fund is a temporary measure designed to help countries in financial difficulties ahead of the establishment of a permanent mechanism in 2013. The temporary fund totals 750 billion euros when contributions from the entire EU and the International Monetary Fund are added.
Optimism needed
Following a meeting between German Chancellor Angela Merkel and Italian Prime Minister Silvio Berlusconi in Berlin, both leaders emphasized the need to take a positive attitude towards the future of the euro.
"It's important not to let pessimism arise," said Berlusconi, "but to create a positive perspective for consumers and business."
Merkel said that "growth and competitiveness were the best ways of ensuring a stable euro." She considered the existing fund to be big enough, but, she added, "We are committed to the euro, just as we have been since the crisis in Greece."
Her spokesman Steffen Seibert said an increase in Europe’s financial war chest was not necessary at present and called for a "period of calm."
"The German government finds at the moment that it makes no sense, and first and foremost that it is unnecessary, to talk about expanding the rescue mechanism," Seibert told reporters. "This is not the time to announce to the world or to discuss publicly whether an expansion might be necessary some day."
The French budget minister, Francois Baroin, also denied that there was a need to increase the size of the fund. "We assume that the fund is big enough as it is to deal with requests from this or that country," he said after a cabinet meeting in Paris.
Author. Michael Lawton (dpa, Reuters, AFP)
Editor: Rob Turner