Brussels, 15/02/2011 (Agence Europe) - On Monday evening, after a meeting of the Eurogroup that was open to non-euro member states, Luxembourg's prime minister (and chair of the Eurogroup) Jean-Claude Juncker said that the ministers had already agreed on the size of the new European Stability Mechanism (ESM) that in 2013 will replace the temporary funds set up in 2010 to ensure stability in the eurozone. Juncker said the ESM's effective lending capacity would be close to €500 billion and revised every two years.
A €500bn lending capacity means an effective doubling of the EFSF's lending capacity, a fund used to bail out Ireland. The ESM would be supplemented by money from the IMF and voluntary, bilateral loans from non-euro countries, explained EU Economic and Monetary Affairs Commissioner Olli Rehn. The EU itself will not contribute to the ESM, although it is currently providing Ireland with a €60bn loan from the EFSM.
Italy's finance minister, Giulio Tremonti, said on Tuesday 15 February that the ESM, like the EFSF, would be funded in line with the calculations for the eurozone countries funding the European Central Bank. Slovakian finance minister, Ivan Mikloš, would have preferred the funding to be decided in line with national GDP as a share of eurozone GDP or a country's share of the eurozone financial market. Quizzed by reporters, Rehn would not say whether ESM contributions would be in the form of guarantees or actual capital.
Comprehensive response to debt crisis. The discussions were part of an intensive cycle of negotiations on a comprehensive response to the eurozone sovereign debt crisis. Juncker said that work was proceeding and would be finalised by the 24 March European Council. He hoped that work would be concluded at ministerial level on Monday 14 March if a special meeting of the Eurogroup does not need to be convened on Monday 21 March, warning that nothing would be agreed until there was agreement on the entire package. Competitiveness issues will be part of the comprehensive package but were not addressed on Monday because the president of the European Council, Herman Van Rompuy, first has to consult the EU27 in this connection. At the last European Council, Luxembourg's prime minister roundly criticised the idea of scrapping the inflation-linking of wage increases, as suggested by Germany and France in their Competitiveness Pact (see EUROPE 10309).
Rehn said there must and would be agreement in March on an overarching strategy for getting out of the debt crisis. The Commission's Annual Growth Review provides solid fundamentals for such a strategy, he said, covering budget consolidation, structural reforms to boost growth, cleaning up the financial industry and boosting funds' scope and powers. He stressed the need for action “within the Community framework” disagreeing with Austria and Germany's statement that no increase is needed in the EFSF at this stage now that the size of the ESM had been decided upon.
Portugal's finance minster, Fernando Teixeira dos Santos, said the talks on strengthening the ESM's clout had gone on too long. Portugal is seen as the third most struggling eurozone economy (after Greece and Ireland) and the costs of rolling over its debt have shot up recently to tough levels. Juncker and Rehn admitted that the situation on the sovereign debt markets was still a concern. Praising Portugal's efforts to correct its public purse and stimulate growth, Juncker said he could not see anything that would change Portugal's attitude, or the attitude of the Eurogroup for that matter, on the likelihood of the country seeking financial aid. (M.B./transl.fl)