Germany pressed European partners Sunday to back a 500 billion euro emergency fund aimed at helping crisis-hit countries in the eurozone. The move comes as part of efforts to reassure markets about the common currency before trading begins Monday.
AFP - Germany urged crisis-hit euro partners to back an unprecedented 500-billion-euro emergency bailout package on Sunday, with France in "complete agreement" hours before Asia-Pacific markets open.
The dramatic bid to raise a European financial war-chest followed urgent telephone calls between US President Barack Obama, German Chancellor Angela Merkel and French President Nicolas Sarkozy, as Europe sought to reassure the world about the euro before trading resumed on Asian markets.
The eye-watering 500-billion euro proposal emerged after Merkel lost her coalition's majority in the upper German house, as angry voters punished Berlin for a U-turn in a 110-billion-euro (145-billion-dollar) Greek bailout dubbed the "fattest cheque in history" by the tabloid Bild.
Desperate to rebuild confidence on markets before chaos already engulfing Portugal and Spain spreads even further, Berlin proposed that euro countries as a whole call in the IMF, a European Union diplomatic source said.
The money, a mixture of "bilateral loans, loan guarantees and credit lines," the source told AFP, would be made available to threatened members of the 16-nation eurozone only.
It would be made up of 440 billion euros, if necessary, from eurozone countries and the International Monetary Fund, on top of 60 billion euros of loan funds from the European Commission, the executive for the EU's 27 member states.
If the plan were to be agreed by EU finance ministers, locked in late-night talks in Brussels, the facility would be unprecedented in public finance history, dwarfing the Greek bailout only ratified by the IMF earlier Sunday.
Sarkozy's office said a deal with Berlin had been struck on measures to "resolve the financial crisis," after shares tumbled across the globe last week.
Ministers had been tasked with heading off predatory threats to government finances, commercial banks and wider economic recovery.
The talks were marked by drama when Germany's Wolfgang Schaeuble was taken to hospital after suffering an allergic reaction to new medication -- and by dispute, when a British government in its final hours in power set tough conditions.
"We will do whatever is necessary," Spanish Finance Minister Elena Salgado, chairing the EU crisis talks, had insisted beforehand, with Anders Borg of non-euro Sweden saying that "we cannot afford disappointment with the markets."
But in what could be its last act in power, non-euro Britain seemingly put paid to a proposal for all 27 EU nations to guarantee massive new borrowings on bond markets in the bloc's name.
"What we will not do and what we can't do is provide support for the euro," British Finance Minister Alistair Darling said amid power-sharing talks at home that were likely to deliver a new Conservative-led government within days.
The bloc wants to create a kind of "bank" that can be used to leverage vast borrowings to bail out troubled economies -- as governments did with their banks during the global financial crisis -- while keeping interest rates down.
An existing 50-billion-euro facility is available only to non-euro members, and has been used in the past to help Romania, Hungary, Latvia.
The other main element on the table was to try and obtain from the European Central Bank what traders and analysts refer to as a "nuclear" option, which means the ECB agreeing to buy euro countries' bonds, or to accept toxic debt as collateral.
The ECB was involved in parallel meetings on Sunday.
"This is an important moment" for Europe, stressed France's finance minister Christine Lagarde, with Austria's Josef Proll labelling it "the biggest challenge since the euro's creation."
Date created : 2010-05-09