ZONE ministers yesterday slammed Brussels for pushing the idea that the region’s bailout fund should be allowed to borrow money to lend trillions of euros to highly indebted countries.
Wolfgang Schäuble, finance minister for euro paymaster Germany, declared: “I don’t really understand how anyone in Brussels… can raise such a silly idea without understanding the construction of the [bailout fund].” Spanish finance minister Elena Salgado added: “That is not on the table.”
The European Commission had suggested that the Eurozone bailout fund, the European Financial Stability Facility (EFSF), should leverage its capital to boost its ability to rescue banks and sovereigns. But ministers think that doing so would affect the credit ratings of member states that underwrite it.
The diverging views of euro states and the Brussels governing apparatus sets the stage for a pitched battle over the fate of the single currency.
A European Commission spokesperson repeated yesterday that the leverage idea is being considered. He told City A.M.: “The idea has not been formally launched but informally the idea is circulating. People are contemplating it.” He said that it is currently “outside the treaties”, meaning that Eurozone nations would have to renegotiate EU law in order to allow the EFSF to borrow money.
But City A.M. understands that the European Commission, which would preside over discussions, believes it can persuade member states and takes ministers’ current positions with a grain of salt since they have changed their minds so often in the past.
There were also suggestions yesterday that Greece’s second bailout could be renegotiated so that private bondholders take more of a hit.