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Eurozone Agrees To Accelerate Payment To Permanent Rescue Fund

Eurozone Agrees To Accelerate Payment To Permanent Rescue Fund
3/2/2012 2:52 AM ET

Eurozone finance ministers on Thursday decided to accelerate the payment to the region's permanent bailout fund, the European Stability Mechanism, underlining their commitment to immediately resolve the debt crisis.

They also expressed their readiness to aid Greece using money from the second rescue package, but on condition that Greece completes the debt write-off deal with its private lenders in the coming week. The proposed deal is estimated to get rid off debt worth EUR100 billion from Greece's balance sheet.

The ministers said that the European Financial Stability Facility was instructed to start raising money for the Greek bailout. Greece launched the bond swap on February 24 and the offer closes on March 8.

European Council President Herman Van Rompuy said Thursday that a decision on boosting the European Financial Stability Facility, or EFSF, and the European Stability Mechanism, or ESM, will be taken at the end of March.

Van Rompuy lauded the decisive legislative actions taken by Greek authorities over the past ten days. "Eurozone leaders support the efforts undertaken by Greece to strengthen the country's institutional capacity," he said.

Eurogroup President Jean-Claude Juncker said in a statement that "Greece undertook decisive and swift legislative action in the areas of fiscal consolidation, revenue administration, pension reform, financial sector regulation and supervision and growth-enhancing structural reforms."

During the first session of the European Council meeting yesterday, the ministers authorized funds to be set aside to recapitalize Greek banks and to support the value of Greek governments bonds, so that the European Central Bank could continue accepting them as collateral.

The Group of Twenty Finance Ministers and Central Bank Governors have clearly stated during a meeting over the weekend that they will not provide extra money to boost the International Monetary Fund's lending resources, unless Europe commits itself to boost their financial firewall to contain the debt crisis.

In a report published today, the IMF urged the European authorities to increase the available capacity of the European firewall by around $500 billion to adequate levels either by enlarging the ESM or running the existing EFSF alongside the ESM.

IMF also urged the central bank to "continue to provide liquidity and stay fully engaged in securities purchases to help improve the prospects for financial stability."

Europe faces another deadline on March 13, when the troika completes the review of the progress made by Greece in the deficit cut program, which would then clear the way for the IMF decision on releasing its share of the EUR 130 billion bailout money.

by RTT Staff Writer

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