Europe Races To Erect Crisis Defenses Before Asian Markets Reopen
BRUSSELS (AFP)--European leaders dramatically pulled out on Saturday of World War II commemorations in Moscow as they worked overtime to erect new crisis defenses before Asian markets reopen.
Seeking a "watertight" defense against predatory threats to banks and wider economic recovery, EU officials scrambled to fix the size and scope of a crisis fund that may well outstrip the unprecedented Greek bailout, due to be transferred to Athens within days.
French President Nicolas Sarkozy cancelled his trip to Russia to pull strings on the financial crisis, the Elysee said, with Italy's ANSA reporting that Prime Minister Silvio Berlusconi had also withdrawn from Sunday's Red Square parade.
Berlusconi told fellow leaders on Friday that the eurozone was in a "state of emergency."
"The European Commission is working today on the proposal it will make... to preserve financial stability in Europe," a Brussels spokesman said on Saturday.
The EU executive's cabinet will meet from 1:00 p.m. (1100 GMT) on Sunday "to discuss and adopt that proposal" ahead of an emergency meeting of finance ministers from the 27-nation bloc from 1300 GMT.
"We have several instruments at our disposal and we will use them," commission chief Jose Manuel Barroso said.
Leading officials remained tight-lipped on the scope of the European Central Bank's involvement, after Berlusconi said ECB chief Jean-Claude Trichet was not ruling out a so-called 'nuclear' option -- introducing emergency provisions to buy up euro governmental debt.
Coy on the issue, Trichet had himself pinpointed "the responsibility of the EU council (of leaders) and of the European Commission."
Diplomats said that powers in "exceptional circumstances" that previously allowed the EU to help non-euro members like Hungary, Latvia or Romania can be invoked to borrow EUR70 billion (90 billion dollars) on the bond market.
A chain of European debt that sent shares tumbling across the globe last week has left EU banks in the firing line as investors flee amid growing fears that eurozone governments will be unable to balance their books over coming years.
After leaders agreed to "accelerate" public deficit reduction plans, Portugal was first to announce a quickened pace of cuts on Saturday.
"Between now and Sunday night we will have a watertight line of defence," euro finance chief Jean-Claude Juncker said.
Barroso insisted that these efforts "will be done under the existing financial possibilities in the community budget."
However, doubts remained for non-euro countries over the longer-term impact on taxpayers.
As the major EU buyer of European governmental debt, the dangers are keenly felt in Germany, which had been accused of foot-dragging over the lion's share of Greek loans.
Its Chancellor Angela Merkel said the new fund would send "a very clear signal" to markets to back off.
"Europe is faced with the same challenge from the Greek crisis as it faced in October 2008 after Lehmann Brothers fell," Christian de Boissieu, an economics professor at the Sorbonne in Paris, told AFP.
Euro leaders also agreed to "reinforce" bloc budget rules and impose new curbs on speculators.
Labour Chancellor Alistair Darling will speak for Britain during Sunday's ministerial meeting as talks on power-sharing unfold back in London.
Former Spanish premier Felipe Gonzalez, whose country has repeatedly accused "Anglo-Saxon" speculators of deliberate targeting, said on Saturday that Britain's refusal to entertain eurozone curbs on alternative investment fund managers in March had cost Europe dearly.
"Look at the hedge funds decision," Gonzalez said, blaming "the general election held the day before yesterday."
European Greens leaders Rebecca Harms and Daniel Cohn-Bendit said leaders had waited until "the brink of the abyss."
Citing "procrastination, which caused high financial and political costs," they backed a rapid push against speculators and urged Europe to go further, calling for the creation of a "genuine European Agency for Debt and Investment which would manage the issuance of eurobonds." |
