Boost emergency funds in eurozone: Barroso


‘The European Commission is pleading for the most credible firewalls possible. It’s important for the confidence of investors in the ability of the euro to overcome this crisis’: José Manuel Barroso

European Commission head Jose Manuel Barroso said yesterday he was in favour of stronger financial security fund mechanisms in the eurozone to help reassure markets, despite Germany’s clear opposition to putting more in the pot for the time being.
“Yes, more has to be done also in terms of firewalls,” for the eurozone, he told reporters in Copenhagen marking the start of the Danish European Union presidency.
“The European Commission is pleading for the most credible firewalls possible. It’s important for the confidence of investors in the ability of the euro to overcome this crisis,” he said.
He went on to stress though that “now the question is how far [euro area] member states are ready to go.”
The single currency bloc currently has a temporary support mechanism for countries in trouble, the European Financial Stability Facility (EFSF), which still contains around 250 billion euros (USD 319 billion) out of an initial lending capacity of 440 billion euros.
That is not considered enough to stem the massive debt crisis seen in large countries like Italy and Spain.
A debate is therefore underway on whether to preventively beef up the temporary fund or instead boost EFSF’s successor, the permanent European Stability Mechanism (ESM), which will come into operation in July.
German Chancellor Angela Merkel is in both cases opposed to pumping in additional funds.

ECB: ‘progress’

Meanwhile, European Central Bank President Mario Draghi said yesterday some of the debt-wracked eurozone countries are making “very substantial, very significant” progress on getting their finances in order.
“Let me say what we are witnessing now is that some of the stressed countries are undertaking very substantial, very significant progress in the fiscal consolidation area, there is no doubt about that,” Draghi told a news conference in Frankfurt.
 “I think that to some extent, the markets are showing some appreciation for this.”
The ECB has persistently argued that while it is willing to act as a firefighter in the eurozone’s long-running debt crisis, it is ultimately up to governments to get their finances in order and restore markets’ confidence in their ability to service their debt.
At a summit last month, EU leaders agreed to conclude a so-called fiscal compact that would legally bind eurozone governments to curb their deficits and sanction those that did not.
The governing council “welcomes the agreement to move to a stronger economic union,” Draghi said.
“The new fiscal compact, comprising a fundamental restatement of the fiscal rules together with the fiscal commitments that euro area governments have made, is an important contribution to ensuring the long-run sustainability of public finances in the euro area countries,” he added.
The swift deployment of these tools was now urgently needed, Draghi continued.
“It would be good if this fiscal compact could be signed at the end of January, not in March” as originally agreed, he said.