Arab Today, arab today eurozone unlocks crisis war chest as greece spain struggle
Last Updated : GMT 23:42:36
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Eurozone unlocks crisis war chest as Greece, Spain struggle

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Arab Today, arab today Eurozone unlocks crisis war chest as Greece, Spain struggle

Luxembourg - AFP

The eurozone on Monday unlocked its 500-billion-euro crisis war chest, the European Stability Mechanism, amid worries over Greece and as Spain agonised over whether to seek a full bailout. The launch of the $650-billion ESM -- immediately given an \'AAA\' rating by credit giant Fitch -- \"marks an historic milestone in shaping the future of monetary union,\" Luxembourg Prime Minister and fund chairman Jean-Claude Juncker said. Juncker spoke after the inaugural meeting of the ESM\'s board, made up of the finance ministers of the 17 countries that share the currency. The Eurogroup ministers then went into state-of-play talks on Greece and Spain expected to yield little fresh news. The permanent rescue fund, which was initially due to enter service on July 1 but was delayed by a challenge at the German Constitutional Court, is not yet operational. In a first stage it will contain 200 billion euros ($260 billion) once initial instalments of government capital are paid in by the end of the month. The ESM monies will build on top of resources left in a temporary fund, the European Financial Stability Facility (EFSF), taking combined lending capacity during the latter\'s wind-down to a total of 700 billion euros. European Commission President Jose Manuel Barroso said this was \"comparable only with the IMF,\" and Fitch said the fund\'s outlook was \"stable.\" ESM managing director Klaus Regling said it was his \"expectation\" that the war chest, like the temporary EFSF, would in time leverage up the fund\'s lending reach using complicated financing techniques. The EFSF raised about 40 percent of its assets from Asian investors on the back of eurozone government guarantees. Long anticipated, the ESM makes its formal debut 10 days before the European Union\'s 27 leaders meet in Brussels for talks expected to focus once again on problems around the Mediterranean. Spain would like the ESM to be able to recapitalise its banks directly, so as to lessen the sovereign debt load, but Germany, the Netherlands and Finland have said this will not be possible until a cross-border mechanism for bank balance-sheet supervision is in order. Madrid agreed a 100-billion-euro credit line with eurozone partners in June but, based on a series of audits, has suggested it may only need to take up to 40 billion of that amount. Bond yields and other market indicators have turned favourable again for Spain, reducing fears it will seek a full bailout. But it nonetheless has some 30 billion euros ($39 billion) in repayments due this month. German Finance Minister Wolfgang Schaeuble repeated in Luxembourg that \"Spain does not need a programme,\" underlining: \"That is what the Spanish government has said over and over again.\" French counterpart Pierre Moscovici, as has become standard, took a different view, saying: \"We respect the sovereignty of a big country like Spain, but we are ready to respond to any initiative that may be taken.\" On Greece, EU officials last week said Athens was unlikely even at an EU summit on October 18-19 to get a green light to resume talks following differences with the European Commission, European Central Bank and International Monetary Fund creditors. Greek Prime Minister Antonis Samaras said Friday that his country could not take more bitter medicine. If its next aid instalment of 31.5 billion euros ($40.6 billion) did not arrive soon, by November state coffers would be empty, he said. German Chancellor Angela Merkel is due in Greece on Tuesday, to what could be a hostile reception from those who see her as responsible for their problems. In neighbouring Cyprus on Monday, Barroso pressed the government to \"move rapidly\" on reform proposals in exchange for eurozone support there, first requested in June.

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