European officials have differing views regarding the steps being taken to halt the crisis of sovereign debt in the euro area, Germany opposing the bailout fund raising 750 billion euros and the introduction of common European bonds, Bloomberg. A similar situation occurred this spring, when the Germans agreed not to “subscribes” to save Greece, which has increased the amount of assistance from an initial amount of 45 billion
euro 110 billion.
Finance Minister Didier Reynders Belgian said that the fund could be increased if the ministers decide to introduce a larger facility, permanent, on the expiry of the current, temporary, falling in opposition to German Chancellor Angela Merkel and French President Nicolas Sarkozy.
At the same time, Luxembourg and Italy have called for the creation of common European bonds (E-bonds), a measure rejected by German Finance Minister Wolfgang Schaeuble. The bonds would be sold by a body that could be created this month.
European leaders met yesterday to discuss the need to increase the bailout fund and the situation at the periphery of the eurozone countries. While Sarkozy and Merkel have rejected the fund last month extension solution, the European Central Bank President Jean-Claude Trichet has indicated recently that governments should consider such action.
Last month, EU leaders agreed on a mechanism for facilitating the restructuring of bonds after 2013.
“We must increase the amount of total permanent mechanism that will come into force in 2013,” said Belgian Finance Minister. Reynders made this statement after the difference between Belgian and German bonds reached their highest level in 17 years. IMF officials say the EU bailout fund is not sufficient, conditions are beginning to be felt pressure on Spain and even Italy.
“There are strong reasons to increase resources available for this safety net and their usefulness for flexibility, including the objective of providing a solid support for banking systems,” the IMF report.
IMF officials have also said the European Central Bank would have to “expand” the purchases of bonds to restore calm to the markets. ECB bought bonds last week, Portuguese and Irish.
Didier Reynders, Belgian Finance Minister, also said that the IMF should redouble its support for the euro area from 250 to 500 billion euros to complement the efforts of the EU. “If the fund is expected to double the EU, the IMF should take a similar position,” he said, adding that IMF director Dominique Strauss-Kahn assured that supports this idea.
Such a decision would cause a storm in Washington. “The American people are tired of borrowing, spending and bailout’s. We are facing a record rate of unemployment and a crisis of its own, and American taxpayers should not bear the risk of countries that have avoided making tough decisions,” he said Mike Pence, a member of Congress, according to The Daily Telegraph.
The euro is a new concept that markets are not familiar
“I do not understand the construction of specific international markets underpinning the euro. We have a monetary union, but we have a common fiscal policy. We need to convince international audiences and markets that this is a new form, a concept that meets the requirements of the 21st century” said German Finance Minister Wolfgang Schäuble (photo) in the Financial Times. He added that if private investors do not accept the risks as bonds gain support, would destroy the concept of market economy and even “political order”