Euro Leaders Delay Decision On Bigger Bailout Fund

Euro Leaders Delay Decision On Bigger Bailout Fund
Market News
Like Us On Facebook
Like Us On Facebook

The leaders of the 17 countries that use the euro have delayed a decision on whether to give their bailout funds more firepower until later in March, European officials said Tuesday. Eurozone leaders were expected to meet Friday afternoon to decide whether the currency union’s bailout funds would be allowed to give more than euro500 billion ($669 billion) in loans.

The decision was highly anticipated as there are concerns that the eurozone’s safety nets – which have already bailed out Greece, Ireland and Portugal – are too weak to support large struggling countries like Italy or Spain.

The European Commission – the EU’s executive arm – the International Monetary Fund and several euro countries want the new, permanent bailout fund, called the European Stability Mechanism, to run in parallel with its predecessor, the European Financial Stability Facility.

Under current plans, the EFSF would stop operating when the ESM comes into force in July and all its commitments to Greece, Ireland and Portugal would have to be subtracted from the ESM’s euro500 billion capacity. That would allow the ESM to give out only around euro320 billion ($428.42 billion) in loans.

Allowing the funds to run in parallel could take the overall lending capacity to around euro750 billion ($1 trillion). However, Germany, the eurozone’s largest economy and the biggest contributor to both bailout funds, has so far resisted such a move.

“The decision (on the bailout funds) is not ready to be taken yet,” said one official. The official was speaking on condition of anonymity to discuss the eurozone’s internal planning.

The delay of the decision on the bailout funds is yet another reminder of the slow pace of decision-making in the eurozone’s two-year-old debt crisis. Ever since the EFSF was set up in May 2010 economists have noted it was too small to convince investors that bonds from vulnerable countries like Italy and Spain were a safe bet.

Since then, euro leaders have taken several decisions to boost the fund’s capacity, but none of them has fulfilled the demands made by the European Commission and the IMF. Last weekend, finance chiefs from the Group of 20 biggest economies made it clear that they would not commit to increasing the IMF’s resources – which would reinforce the eurozone’s safety nets – until the currency union has done its part by boosting its own bailout funds.

Any increase in the funds’ capacity would require parliamentary approval in most euro countries. Richer states in the eurozone, however, are reluctant to go back to their lawmakers for yet more money just after committing to a second massive rescue for Greece.

Because of that, European Council President Herman Van Rompuy decided not to call a special summit of eurozone leaders that had been planned for Friday afternoon, a second official said.

A decision on the bailout funds will be taken later in March, either at a meeting of eurozone finance ministers on March 12 or, if necessary, at an extra summit of euro leaders, the first official said.

A separate meeting of the 27 European Union leaders on Thursday and Friday will take place as scheduled.

At the EU meeting, leaders will sign a new treaty setting out tighter spending rules for the eurozone and are expected to elect Van Rompuy for a second term as president of the European Council. He is also expected to be elected as president of the eurozone, making him the chairman of the summits of euro leaders.

Associated Press

Share Tweet
React
Like Us On Facebook
Like Us On Facebook

Preston Waters

Preston Waters is a thinker. He's not your traditional philosophical persona, however, as he leaves no topic untouched. Covering all the bases, from business to women, Preston Waters is the ultimate man's man for Gen-Y.

More In Market News

News Preston Waters

Stocks Off to Stellar Start in May

Stocks were kicking off May in high style Tuesday, posting sharp gains after a much better-than-expected report on U.S. manufacturing activity. The Dow Jones Industrial Average was rising 103 points, or 0.8%, at 13,317, after hitting a four-year high at 13,338. The S&P 500 was up 14 points, or 1%, at 1413, and the Nasdaq was adding 23 points, or 0.7%, at […]

News Preston Waters

Bank Of America, JPMorgan: Dow Midday Movers

U.S. stocks were rising in midday action Tuesday following a better-than-expected read on U.S. manufacturing activity.The Dow Jones Industrial Average was up more than 116 points, or 0.9%, at 13,330. The biggest percentage gainers within the Dow were Bank of America (BAC), JPMorgan Chase (JPM) and Intel (INTC). Shares of Bank of America rose 2.59% to $8.32. The bank said Tuesday it plans to lay […]

News Preston Waters

Monster Stocks Soar Amid Rumors Coca-Cola Is Set To Buy Energy Drink

Monster Beverage Corp’s shares soared on Monday following a report that Coca-Cola Co. was considering buying the energy drink maker. The Wall Street Journal cited unnamed people in reporting that the world’s biggest soft drink maker was in talks to buy Monster. If a deal transpired, Monster would be Coca-Cola’s largest brand acquisition ever. Monster declined […]

News Preston Waters

Stocks Surge After Strong Manufacturing Report

Stocks were surging in morning action Tuesday after a much better-than-expected report on the pace of national manufacturing activity in April.The Dow Jones Industrial Average was rising 80 points, or 0.6%, at 13,294. The S&P 500 was up 12 points, or 0.8%, at 1410, and the Nasdaq was adding 29 points, or 1%, at 3075. Stocks finished modestly lower Monday, marking […]

News Preston Waters

Bank Of America Keeps Shrinking

Bank of America (BAC)’s plan to lay off some of its highest-paid executives looks like the right response to the current banking environment. The Wall Street Journal reported Tuesday the bank will cut 2,000 positions in its investment banking, commercial banking and non-U.S. wealth-management units targeting “the high-earning employees whose efforts helped Merrill Lynch account for the bulk of […]

News Preston Waters

Stock Market Story: May 1

The first trading day of May got off to a mixed start early Tuesday with all three major U.S. equity indices honing to close to the flat line ahead of a key report on the pace of U.S. manufacturing activity in April. The Dow Jones Industrial Average was down 9.5 points, or 0.07%, at 13,204.The S&P 500 was up less than a […]

Also On Elite

Sports

How Isaiah Austin’s Potential Led Him To A Different Successful Path Than The One He Imagined

Most YouTube “Hoopmixtape” videos feature songs like “Remember the Name” with synchronized beats to emphasize vicious slams or deadly crossovers. That isn’t the case for Isaiah Austin. He scored his highlight video from the NIT championship game, accompanied by a lonely guitar that strummed three melancholy notes, which is an odd selection for such a display of all-around […]