Europe set to speed up building of new bailout

By Gabriele Steinhauser

Associated Press

Published: Wednesday, March 28 2012 9:10 a.m. MDT

The eurozone's biggest economy also warns that large spending on the rescue funds could raise questions over the ability of some governments to actually come up with the money if bailed-out countries fall behind on their loans.

"It is regrettable that apparently no figure is ever high enough in this discussion," Chancellor Angela Merkel's spokesman, Steffen Seibert, said of the OECD's request for a €1 trillion firewall. "The result of such proposals ... is unfortunately that markets are unsettled again and again."

In a partial concession, German Chancellor Angela Merkel said earlier this week that she would be open to letting the €200 billion in old bailout loans run separately from the €500 billion, which would effectively lift overall lending to some €700 billion.

The big remaining question — apart from the ESM capital payments — is how to deal with the €240 billion left in the EFSF. Merkel indicated that the EFSF could run until July 2013, as had been planned when it was set up, but did not say what should happen to the remaining money.

The European Commission and several euro countries want the remaining money to be included in the ESM, but the two officials aid that option had almost no chance of passing at the finance ministers' meeting.

A compromise would see the remaining €240 billion run on until July next year, providing a sort of buffer until the ESM's capital has been built up further.

But that would still fall far short off the €1 trillion favored by much of the rest of the world and raises questions of whether big non-eurozone economies will agree next month to send more money to the IMF. The Washington-based fund has asked for $500 billion in new resources so it can effectively help struggling economies over the coming years. The eurozone has already promised $200 billion.

__

Geir Moulson in Berlin contributed to this story.

Get The Deseret News Everywhere

Subscribe

Mobile

RSS