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18 September 2011

Reuters: EU finance ministers take stock of progress on debt crisis


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EU finance ministers broke no new ground in dealing with the eurozone debt crisis in discussions over the weekend, instead absorbing some ideas and rejecting others and taking stock of progress on agreed steps.


Ministers and central bank governors from the 17 countries using the euro and the broader 27-nation European Union met on Friday and Saturday in the Polish city of Wroclaw to discuss Europe's slowing economic growth and progress in beefing-up eurozone defences against the sovereign debt crisis. In an unprecedented visit to the informal talks of top EU financial officials, US Treasury Secretary, Timothy Geithner, made an appearance in Wroclaw on Friday to urge Germany to provide more fiscal stimulus to the slackening eurozone.

But Geithner's call for action by those who can afford it was rejected because the eurozone believes that market trust in the sustainability of its public finances, and therefore consolidation, is more important than spending on growth. "Fiscal consolidation remains a top priority for the euro area", said Luxemburg's Jean-Claude Juncker, chairman of eurozone finance ministers.

Greece's finance minister on Saturday dismissed talk that the debt-strapped country was headed for default, while saying Prime Minister George Papandreou cancelled a trip to the United States because tough decisions had to be made imminently. "The comments and analyses about an imminent default or bankruptcy are not only irresponsible but also ridiculous", Finance Minister Evangelos Venizelos said in a statement.

German central bank governor, Jens Weidmann, expressed reservations about the idea of EFSF leveraging on Saturday. "It depends on how leverage is done. If it is done so that in the end the euro system is at risk, then that does not fulfil the requirements", he said. Leveraging would mean that the EFSF could guarantee to cover potential losses of the European Central Bank on purchases of bonds of distressed eurozone sovereigns, boosting the fund's intervention potential even fivefold.

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© Reuters


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