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EU agrees to do whatever necessary to guard euro

By Gabriele Steinhauser

Associated Press

Published: Thursday, Dec. 16 2010 3:58 p.m. MST

European Council President Herman Van Rompuy gestures while speaking during a media conference at an EU summit in Brussels, Thursday, Dec. 16, 2010. The European Union's president says EU leaders are ready to do whatever necessary to save the embattled euro currency.

Virginia Mayo, Associated Press

BRUSSELS — European Union leaders are ready to do whatever necessary to save the embattled euro currency, the EU president said Thursday — but they aren't ready to beef up its existing bailout fund despite growing worries about countries overwhelmed by debt.

EU President Herman Van Rompuy said at a summit in Brussels that the heads of state of the 27 EU members "stand ready to do whatever is required to ensure the stability of the euro zone."

However, he insisted that only about 4 percent of the region's €750 billion ($992.85 billion) bailout fund has been utilized since it was introduced in May, and that the question of expanding it "is not being posed today."

He spoke after EU leaders agreed in Brussels on Thursday to change their central treaty to allow for a permanent rescue plan for countries overwhelmed by debt after 2013, when the existing bailout fund expires. They haven't agreed on details of the mechanism yet, including how much money will go into it.

And in the meantime, pressure is high for Europe to solve its immediate debt woes.

Ratings agencies revealed new worries about Greece, where protests against debt-driven austerity measures turned violent Thursday. The far-larger Spanish economy is also facing worryingly higher borrowing costs.

The EU set up a temporary bailout fund this year, but investors have been demanding stronger assurances that the bloc's divided leaders will protect their shared currency.

The treaty change contains no details, but is a necessary legal step toward establishing a permanent mechanism for dealing with countries that can no longer pay off their debts.

It will by necessity include a permanent pot of money to bail out over-indebted countries. Officials also have said that it may contain language allowing the EU to force private creditors to assume some losses when a country can no longer pay off its bonds.

Finance ministers of the 27 EU nations will now begin working out details of the new mechanism, including how much money euro-zone nations are willing to chip in and when exactly private creditors would be involved.

The treaty change will allow "member states whose currency is the euro" to "establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro as a whole."

Any aid to heavily indebted countries under the new mechanism would be "subject to strict conditionality." Such conditions would be similar to those imposed on Ireland and Greece in their bailouts, to cut their deficits and make their economies more competitive.

EU leaders had agreed to set up the so-called European Stability Facility at their previous summit in October and finance ministers outlined its broad features at the end of November.

"Today is a big day for Europe," European Commission President Jose Manuel Barroso said after Thursday's meetings in Brussels.

The summit wraps up Friday.

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