UPDATE 4-EU eyes 600 bln euro crisis mechanism, sources say
* EU ministers discuss big sums for anti-crisis mechanism
* Existing aid plan for non-euro states to apply to euro zone
(Adds details of sums, quotes)
By Ilona Wissenbach and Julien Toyer
BRUSSELS, May 9 (Reuters) - European Union finance ministers
sought agreement on Sunday on emergency measures that could be
worth up to 600 billion euros ($805 billion) to prevent Greece's
debt crisis spreading to other countries in the euro zone.
Vowing to do everything to defend the euro against the
"wolfpack" of the financial markets, which have been pounding
Greece, Spain and Portugal, the ministers discussed much larger
sums than previously to try to end the market turmoil.
EU sources said Germany, which faces public opposition to
bailouts, was resisting any deal that put no limit on the
potential financial assistance for countries such as Portugal,
Spain or Ireland and wanted the IMF involved.
But a compromise was being discussed that included loan
guarantees by euro zone countries worth 440 billion euros, a
stabilisation fund worth 60 billion euros and a 100 billion euro
top-up of International Monetary Fund loans, they said.
"We now see ... wolfpack behaviours (on markets), and if we
will not stop these packs, even if it is self-inflicted
weakness, they will tear the weaker countries apart," Swedish
Finance Minister Anders Borg told reporters in Brussels.
U.S. President Barack Obama spoke to the German and French
leaders by telephone to reinforce the need to calm jittery
financial markets quickly and ensure the global economy is not
jolted by a sovereign debt crisis. [ID:nN09190358]
Economists estimate that if Portugal, Ireland and Spain
eventually require similar three-year bailouts, the total cost
could be 500 billion euros.
Comments by the ministers, and by heads of state and
government from the 27-nation EU who called for a new
anti-crisis mechanism in talks on Friday, showed greater urgency
from a bloc that fears for its future if the crisis is
mishandled.
The sums that EU sources said were being discussed dwarfed
those considered at previous crisis meetings and deals that have
failed to contain the market turmoil, which has made Greece's
borrowing costs unsustainable.
In early Asian trade on Monday, the euro <EUR=> extended its
recovery from 14-month lows and was up almost 2 percent against
the dollar. The single currency rose 3 percent versus the yen.
COMMISSION PROPOSALS
Greece, with a budget deficit of 13.6-14.1 percent of gross
domestic product in 2009 and debt of more than 115 percent of
GDP, has secured a 110 billion euro three-year loan package from
the 16-country euro zone and the IMF.
The EU executive, the European Commission, wants to ensure
other vulnerable countries can stave off similar crises.
The European Central Bank is also expected to play a role in
the containment efforts but it is not clear what. EU sources
said ECB governors discussed the crisis on Sunday but no details
were available.
"I see a 'magical' triangle that can provide a solution: the
EU finance ministers, the ECB and the affected countries," said
Austrian Finance Minister Josef Proell.
The Commission has proposed a stabilisation framework to
provide a safety net for other euro zone countries with high
deficits and debt, and wants an aid mechanism for non-euro zone
countries extended to nations in the single-currency bloc.
EU sources said the Commission wanted the amount available
under the mechanism, called the balance-of-payments facility, to
be raised by 60 billion euros. The maximum available now is 50
billion euros.
"The Commission has put on the table ... a proposal that is
ambitious and comprehensive ... to enable the Union to borrow on
the international markets but also looking beyond the community
budget to bring member states into the mechanism," a European
Commission official said.
A similar mechanism was successfully used in the cases of
Latvia, Romania and Hungary after the pool of money available
was increased to 50 billion euros last year.
A German government source said Berlin wanted the IMF
involved in the safety net mechanism and made clear tough
conditions must be attached to any loans.
"The government will insist that the IMF -- as with the
Greece case -- participates in any possible bilateral aid," the
source said.
Chancellor Angela Merkel faces deep popular opposition to
her decision to release aid to Greece. Voters punished her
centre-right coalition in a state election on Sunday, depriving
her of a majority in parliament's upper house. [ID:LDE64801V]
German Finance Minister Wolfgang Schaeuble was admitted to
hospital on Sunday after an apparent bad reaction to medicine
and missed the ministers' talks. [ID:nLDE6480KO]
(Additional reporting by Paul Carrel in Berlin, and Justyna
Pawlak, John O'Donnell, Bate Felix and David Brunnstrom; writing
by Jan Strupczewski and Timothy Heritage, editing by Dale
Hudson)
((jan.strupczewski@reuters.com; +32-2-287 6837;
Reuters messaging: jan.strupczewski.reuters.com@reuters.net))
($1=.7453 euro)
Keywords: EU GREECE/
Keywords: EU GREECE/
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they should have admitted that spain sought help to the tune of 280B. Much simpler. |
