European governments are preparing for a one-year increase in the ceiling on rescue aid to 940 billion euros (US$1.3 trillion) to keep the debt crisis at bay, according to a draft statement written for finance ministers.
The euro-area finance chiefs will probably decide at a meeting in Copenhagen today to run the 500 billion euro permanent European Stability Mechanism (ESM) alongside the 200 billion euros committed by the temporary fund, a European official told reporters in Brussels on Wednesday.
Beyond that, they are also set to allow the temporary fund’s unused 240 billion euros to be tapped until the middle of next year “in exceptional circumstances following a unanimous decision of euro-area heads of state or government notably in case the ESM capacity would prove insufficient,” according to the draft dated March 23 and obtained by Bloomberg News.
The boost to the war chest would come after Chancellor Angela Merkel of Germany, the dominant power in two years of crisis fighting, this week warned of “fragility” in Portugal and Spain. It would also be designed to lure the rest of the world into putting more money into the IMF’s arsenal.
European policymakers are wrangling over amendments to rules written last year that limit total available bailout funds to 500 billion euros. The IMF has made additional aid contingent on Europe first doing more to help itself.
Finance ministers may make changes to the draft statement at their meeting today. In Wednesday’s briefing, the European official said the likeliest outcome is an anti-crisis buffer somewhere between 700 billion and 940 billion euros, without saying how long these amounts would be available.
The language in the draft also emphasizes the political hurdles to tapping the unused parts of the temporary fund, the European Financial Stability Facility. Merkel or any other eurozone government leader could exercise a veto.
Extra money won’t put the debt crisis to rest, said Jens Weidmann, who was Merkel’s economic adviser until he became head of Germany’s central bank last year.
“Just like the ‘Tower of Babel,’ the ‘Wall of Money’ will never reach heaven,” Weidmann said on Wednesday at Chatham House in London. “If we continue to make it higher and higher, we will, in fact, run into more worldly constraints,” which might include setting “incentives that lead to new problems in the future.”
In addition, an increase in the aid ceiling wouldn’t make the entire sum available upfront. It would require a capital call in an emergency to mobilize the ESM’s entire 500 billion euros before mid-2014.
Assuming that the temporary fund expires in the middle of next year without making further commitments, the permanent aid ceiling would revert to 700 billion euros, according to the draft. The ESM’s provisions allow the finance ministers to raise or lower its capital at any time.
Discussion of the lending cap will coincide with a possible further speedup of the capitalization of the permanent fund. The first of five planned annual payments will be made in July and the second in October, the draft statement said.
The remaining payments may also be accelerated, with two next year and the final installment in the first half of 2014, two years earlier than previously planned, the statement said.
As a result, Europe would be capable of making a theoretical three-year aid pledge of 500 billion euros on July 1 and having enough money to follow through, the European official said.
The firewall “has to be credible,” German government spokesman Steffen Seibert told reporters in Berlin on Wednesday when asked about calls for the backstop to be as much as 1 trillion euros.
At the same time, “it’s regrettable that in this discussion no number is ever big enough,” he said.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last