BRUSSELS — The European Union insisted its bailout pot has enough money to handle the continent's government debt crisis — but conceded its earlier bank stress tests were not tough enough and that Greece will need more time to repay its bailout loans.
While EU officials in Brussels sought to calm markets by stressing that their anti-crisis measures were enough to support the euro's credibility, the government in bailed-out Ireland announced a brutally tight budget and more taxes for next year as protesters banged drums and blew whistes outside parliament's gates.
Germany, the euro's economic and financial heavyweight, is refusing to increase the €750 billion ($1 trillion) financial backstop set up to help euro members that run out of money, and the Netherlands and Austria are backing Berlin on that.
The three — among the euro governments with still-solid finances — are also against proposals to go even further and start a pan-European bond to help governments borrow more money.
Instead, Germany says it's now time to implement the decisions taken in recent months — agreements for governments to cut back, toughen rules against overspending, and set up new bailout rules that in some cases could ask bondholders to take losses.
"It doesn't make sense to constantly start new debates," said German Finance Minister Wolfgang Schaeuble following a two-day meeting with his European counterparts.
European governments are struggling to keep government finances in several heavily indebted countries from collapsing. Jittery bond investors have been raising the interest rates they demand to loan to those countries as the dire state of their finances has become clearer. Ireland and Greece were bailed out after rising bond interest yields effectively shut them out of credit markets.
The pressure on the EU's finance ministers has abated somewhat as the euro has recovered much of its lost ground and the cost of borrowing in countries like Portugal has come down from record euro-era highs. Despite that recent stabilization, market interest rates remain prohibitively high.
Given the refusal of a number of countries to back fresh "shock and awe" measures — raising the ante by putting up new money to deal with the crisis — the EU is now counting on highly indebted states like Ireland, Spain and Portugal to press ahead with deep austerity measures.
Meanwhile, the EU is working to boost confidence in the banks, which hold much of the bonds from shaky governments.
As a result, it decided to conduct a new round of stress tests on Europe's banks from February.
Olli Rehn, the top monetary official in the EU, said these will be "more rigorous and more comprehensive" than those conducted on 91 banks in July and will crucially assess a bank's ability to access money quickly under stress. The earlier version did not assess this liquidity position.
July's stress tests have come under criticism after the bailout of Ireland last month was predicated largely on revelations of worse financial problems afflicting its banks. All the Irish banks assessed in July were given a clean bill of health as only seven of the 91 banks tested failed.
As a result, investors continue to fret about the health of many of Europe's financial institutions and how they affect governments' potential liabilities.
Many analysts have warned that the region's existing emergency rescue fund would be too small to save Spain, Europe's third largest economy.
- 'Deseret News National Edition': Hobby Lobby,...
- Man seeks video of 1995 Oklahoma City...
- Fast food workers vow civil disobedience
- Obama maintains busy fundraising schedule,...
- Plan to simplify 2015 health renewals may...
- Taiwan plane crash survivor crawls out of...
- A new initiative from the Obama...
- Bills aim to bring marriage, family law into...
- Hamas calls for end to blockade of Gaza... 25
- Federal land managers criticized over... 24
- Obama fundraises for Dems; demands GOP... 21
- Feds cap fines for not buying health... 21
- Obama maintains busy fundraising... 18
- Ted Cruz demands answers on FAA flight... 16
- After government topples crosses in... 14
- Varying health premium subsidy amounts... 13