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Europe

Finance ministers nail down details of eurozone safety net

Video by Georja CALVIN-SMITH

Text by NEWS WIRES

Latest update : 2010-06-08

Eurozone finance ministers met in Luxembourg Monday to set terms on massive emergency loans and new cross-border budget sanctions, just as fresh concerns surrounding debt in eastern Europe hit stocks and the euro.

AFP - Euro finance ministers on Monday "signed" legal documents establishing a 440-billion-euro fund for emergency loans to debt-laden states, Luxembourg Prime Minister Jean-Claude Juncker said Monday.

"We signed a few moments ago," Juncker told a press conference in Luxembourg, which he said became the first shareholder in a new "limited liability company" set up to administer the fund, worth 525 billion dollars.

Juncker said that "some member states" had still to complete their adherence, but a diplomat added that Germany had signed minutes before Juncker spoke.

An "approval process," including the appointment of a board chairman, will be "finalised in the coming days," Juncker said.

European Union economic and monetary affairs commissioner Olli Rehn said the signature, almost one month after countries agreed the trillion-dollar "backstop" facility in conjunction with the IMF, showed there was "no uncertainty left" over Europe's capacity to deliver on its promises.

Rehn said the eurozone aid came on top of a 60-billion-euro facility guaranteed by the EU's budget, "based on long guarantees ... which is up and running and can be readily activated if requested and deemed" required.

Portugal, Ireland, Spain and Italy are among the favourites expected by markets to call on help from the fund, but Rehn warned that obtaining cash loans could be as long and drawn-out an affair as proved the case with Greece.

"The essential thing is that this is based on the same kind of conditionality as the rescue package for Greece," he said.

Loans would be "strictly conditional" and there "would have to be a programme agreed with the country(ies) concerned with the EU and the IMF," meaning severe spending cuts and structural reforms to tax and labour markets.

Date created : 2010-06-07

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