- Title: BELGIUM: EU leaders seek greater finacial governance after Greek bailout
- Date: 11th May 2010
- Summary: BRUSSELS, BELGIUM (MAY 10, 2010) (REUTERS) EUROPEAN COMMISSION PRESIDENT JOSE MANUEL BARROSO ARRIVING FOR MEETING ORGANISED BY WORLD ECONOMIC FORUM
- Embargoed: 26th May 2010 13:00
- Keywords:
- Location: Belgium
- City:
- Country: Belgium
- Topics: International Relations,Economic News
- Reuters ID: LVA71R6P2IYJ3T3PORE9EX7DS98M
- Aspect Ratio:
- Story Text: European Commission President Jose Manuel Barroso said on Monday (May 10) a plan by European Union finance ministers, central bankers and the International Monetary Fund to stabilise the euro will fullfil its objective.
''This morning's agreement will ensure that any attempt to weaken the stability of the euro will fail. It shows that a determination of all of the European Union to stand behind any of its member states when they are severely threatened caused with severe difficulties caused by exceptional circumstances beyond their control,'' Barroso said.
The $1 trillion package consists of 440 billion euros in guarantees from euro area states, plus 60 billion euros in a European stabilisation fund that could be disbursed to help euro zone states if needed on strict austerity conditions.
EU finance ministers said the International Monetary Fund would contribute up to 250 billion euros, taking the total to 750 billion euros, or around $1 trillion.
Financial markets had punished euro zone members with big budget deficits such as Portugal, Spain and Ireland, threatening to plunge them into Greece's plight, in turn roiling global markets.
Barroso said lesson needed to be learn from the crisis.
Both Barroso and European Council President Herman Van Rompuy pushed for stronger economic governance at a EU level.
''The lesson from this crisis is if you want a monetary union you should promote also an economic union,'' Barroso said.
Van Rompuy said only greater EU economic governance will help stabilise the euro in the long term. Van Rompuy spoke about a economic government for the Euro zone.
''Crisis are challenges. We proved that we were ready to be very courageous these last days and we have to be very courageous also in the proposals I will make on behalf of the task force in view of stronger economic not only governance but even government in some way so that the euro zone is stabilised for a very very long time,'' Van Rompuy said.
But the plan leaves longer-term questions about whether Europe's weakest economies can manage their debt, analyst said.
Sceptics questioned whether the euro zone could hold together over the long term and underpin a fragile currency union with stronger political and fiscal instruments.
For Daniel Gros, the director of the Centre of European Policy studies, it is the end of the euro as we knew it.
''Basically our leaders have torn up the Maastricht Treaty. The no bailout clause is no longer and the European Central Bank has become a fiscal agent for the weaker countries. May be it was unavoidable to kill the old euro to save and create a new euro but now really the hard work starts. How can one make this work in the long run ? And there the signs are not so encouraging,'' Gros said.
In a move sought by anxious European banks, the European Central Bank will buy euro zone government bonds in a reversal of its long-standing reluctance to use what many economists call the "nuclear option" under market pressure.
The "shock and awe" scale of the package of standby funds, loan guarantees, liquidity measures and central bank bond purchases surprised financial analysts and the euro rose some 2 percent, while stocks in Europe and Asia firmed.
The euro currency, which last week sank to a 14-month low against the dollar, rose to $1.2950 on the ECB decision to buy debt. It was changing hands at $1.2975 at 0730 GMT. - Copyright Holder: REUTERS
- Copyright Notice: (c) Copyright Thomson Reuters 2015. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: None