Arab Today, arab today euro fund clears key german test as greece awaits audit
Last Updated : GMT 21:55:33
Arab Today, arab today
Arab Today, arab today

Euro fund clears key German test, as Greece awaits audit

Arab Today, arab today

Arab Today, arab today Euro fund clears key German test, as Greece awaits audit

Berlin - AFP

Europe\'s rescue fund cleared a major hurdle Thursday when German lawmakers voted overwhelmingly to beef it up, boosting markets as attention turned to a key international audit of debt-mired Greece. Stock markets on both sides of the Atlantic greeted the news with relief as Chancellor Angela Merkel survived a vote that proved a hard-fought test of her political authority as the world looks to her to defuse the euro debt crisis. Deputies voted by 523 to 85, with three abstentions, to expand the size and scope of the 440-billion-euro ($590 billion) European Financial Stability Facility (EFSF), handing it new powers, for example to buy sovereign bonds. \"This is a clear show of support for the common currency,\" said Holger Schmieding, from Berenberg Bank. The expansion also boosts the contribution of Germany, Europe\'s paymaster, to 211 billion euros, though Finance Minister Wolfgang Schaeuble insisted there would be no more cash flowing from Berlin.  \"We have agreed German guarantees of 211 billion euros for the EFSF. More is not necessary,\" he said. Merkel\'s spokesman Steffen Seibert said on microblogging site Twitter: \"It is good that the Bundestag voted for an expanded EFSF rescue fund with such a large majority. Europe and half the world were looking to Germany.\" German dailies had dubbed Thursday \"decision day for the euro\" and \"a fateful day\" for Merkel, amid hopes Berlin would offer solutions to a eurozone crisis that US President Barack Obama has said is \"scaring the world.\" Despite fevered speculation in the run-up to the vote, Merkel did not have to rely on the opposition to pass the bill, staving off a potential political crisis that some feared could spark new elections in Europe\'s top economy. German Foreign Minister Guido Westerwelle said that with the vote, \"the signal to our European partners is that you can rely on Germany.\" \"Today\'s decision is an important contribution to solving the debt crisis and to stabilising the euro,\" Westerwelle said. The European Commission also hailed the result with a spokesman for Economic and Monetary Affairs Commissioner Olli Rehn saying: \"We welcome this new approval of the EFSF.\" The spokesman, Amadeu Altafaj, added that the rescue fund was still a \"work in progress\" but stressed Brussels hopes all eurozone states will have ratified the agreement by mid-October.  Cyprus and Estonia also approved the changes to the EFSF on Thursday, leaving just four of the 17 eurozone countries to vote. The main stumbling block now appeared to be tiny Slovakia, the eurozone\'s second poorest country, where the junior coalition partner, Freedom and Solidarity, has repeatedly vowed to torpedo the EFSF\'s passage. As if to underline the importance of the fund\'s new powers, Italy issued 7.85 billion euros worth of bonds Thursday with sharply higher interest rates, signalling renewed discontent on the markets. Former British prime minister Gordon Brown warned of more doom ahead, saying in an opinion piece in the New York Times: \"It has been clear for some time that ... the euro cannot survive in its present form.\" Many banks were \"close to insolvency,\" argued Brown, also a former finance minister, adding that \"a far larger rescue fund -- two, perhaps three trillion euros -- is needed to stabilise the eurozone.\" Brazil, which along with the United States has been outspoken about the eurozone needing to move quicker to contain the debt crisis, welcomed the German vote. \"It\'s excellent news that will permit the European Union to better react to the crisis,\" said Finance Minister Guido Mantega. Meanwhile in Athens, auditors from the European Union, European Central Bank and International Monetary Fund met with officials as part of their audit to decide whether to disburse eight billion euros ($11 billion) of crucial aid for Greece. Eurozone finance ministers will likely decide on October 13 \"whether the conditions are met for the next tranche to be disbursed,\" Schaeuble said in the parliamentary debate. \"I cannot say what this decision will be, I cannot anticipate the conclusions of the troika,\" he added, referring to the international auditors. As staff associations occupied nearly a dozen Greek ministry buildings in protest at the crippling austerity measures needed to tackle the country\'s debt pile, Athens says it has enough cash to pay the bills until the end of October. As Greece waits for the funds from a first 110-billion-euro bailout approved last year, analysts have already turned their attention to a much-needed second 159-billion-euro Greek rescue package agreed in July. \"Getting a second bailout package for Greece through parliamentary proceedings in Berlin may not be easy, to put it mildly,\" said analyst Schmieding. \"Putting taxpayer money at stake to support Greece is a tougher sell than to strengthen a rescue shield for Europe,\" he added. Greek austerity measures have met fierce resistance and Athens was paralysed for three days this week by a transport strike, with a general strike scheduled for October 19. The German vote sent European stocks higher, but later trimmed their gains, with Frankfurt ending the day up 1.10 percent and Paris 1.07 percent, but London showing a loss of 0.4 percent. US stocks rose sharply at the opening, but in afternoon trade the Dow was off 0.04 percent, while the S&P 500 had given up 0.59 percent and the Nasdaq was down 1.94 percent. The euro gained around one percent against the dollar before slipping back.

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