EU speeds payments to permanent aid fund
European leaders agreed to provide capital faster for the planned permanent bailout fund in a concession to international pressure to strengthen the bloc?s defenses against the debt crisis.
Euro governments might pay the first two annual installments into the 500 billion-euro ($666 billion) fund this year and complete the capitalization in 2015, a year ahead of schedule. A decision will come later Friday.
?There will be an acceleration,? European Union President Herman Van Rompuy told reporters in Brussels late yesterday after an EU summit. ?It could be starting with the payment of two tranches in 2012 but we have to take a definite decision.?
German Chancellor Angela Merkel, who last year pushed for the longer five-year payment schedule, reversed course this month and spearheaded the drive to speed up the timetable as world leaders and the International Monetary Fund pressed for bolder European action to stamp out the crisis.
At the same time, Merkel forced the EU to put off a discussion of increasing the overall ceiling for rescue lending. Others, including Luxembourg Prime Minister Jean-Claude Juncker, have pushed to pair the permanent fund, to be set up in July, with the temporary facility that is set to lapse in mid-2013.
The euro weakened 0.3 percent to $1.3270 at 9:25 a.m. in Brussels while the Stoxx 600 Index added as much as 0.3 percent.
Finance ministers from Group of 20 countries made clear last month that they won?t pour more money into the IMF?s anti- crisis resources until the 17-nation euro zone does more to help itself.
IMF Deadline
Europe faces a March 13 deadline — a day after the next meeting of euro finance chiefs — to boost the rescue limit in order to win over the IMF, Juncker said.
?The IMF is meeting on March 13 and will only allow its participation to increase if the euro group countries build the firewalls a little higher than they are now,? Juncker, who chairs euro finance meetings, told reporters.
A decision to raise the lending limit can be made by finance ministers without the need for a leaders? summit, Van Rompuy said.
Europe plans to equip the permanent fund, known as the European Stability Mechanism, with 80 billion euros in cash and give it the right to call another 620 billion euros in an emergency. The total would enable it to lend 500 billion euros and maintain a buffer to garner an AAA credit rating.
Firewall
?The firewall needs to be strong and we?ve also said the ESM can be more efficient by speeding up installments,? Dutch Prime Minister Mark Rutte said.
Leaders opened the second day of their two-day summit by signing a German inspired deficit-control treaty, putting a tighter bind on spending just as they switch from fighting the debt crisis to promoting growth.
All 17 countries in the euro and eight outside it signed the treaty, which mandates automatic corrections of deficits that stray from targets. It is due to take effect on Jan. 1, 2013.
[Bloomberg]
