European leaders signaled a willingness to grant troubled nations a fresh financial lifeline, ring-fencing the euro in a bid to fend off market vultures once and for all.
With Portugal and even Spain predicted to need aid like Greece and Ireland, EU President Herman Van Rompuy said they were “ready to do whatever is required to ensure the financial stability of the eurozone.”
While a Brussels summit stopped short of meeting myriad calls for a new injection of rescue funding, the “political will” of the 27 national leaders is “beyond doubt,” Van Rompuy insisted.
“It’s their way of saying they are prepared to put lots of money on the table,” explained a senior EU diplomat.
Belgian Prime Minister Yves Leterme also spoke of “a joint will to put in as much money as needed,” while a French governmental source said Paris certainly “is absolutely inclined to increase the size of the fund as much as necessary,” in a significant change of mood.
The moment had not yet come to talk of specific figures, with Ireland having tapped less than 4 percent of existing capacity put up by euro partners, but European Central Bank President Jean-Claude Trichet appeared less than excited.
After shelling out more than 72 billion euros (US$95.7 billion) since May on iffy eurozone bonds, Trichet said pointedly: “I relayed my messages.”
He has recently agitated for governments to take back the initiative after heavy criticism they were being enslaved by markets — echoed on Thursday by International Monetary Fund Managing Director Dominique Strauss-Kahn.
A permanent emergency rescue fund will be established from mid-2013, to replace an existing trillion-dollar joint EU-IMF facility, with a rewrite of the EU rule-book ordered by Dec. 31, 2012.
The latest EU stance is intended to draw a line under a year in which the bloc looked like being torn apart by wolves on international money markets after Greece secured a 110 billion euro bailout in May.
The EU stressed that new loans and guarantees will only be made available if judged “indispensable” by peers, and as with Greece or Ireland, in exchange for painful cuts and other changes.
That tweak came at Germany’s insistence, although Europe’s paymaster made no discernible progress in a similar push for future bailouts to need unanimous backing — which many oppose as it would grant Berlin an absolute veto.
“Euro countries need to coordinate economic policy” more, German Chancellor Angela Merkel said afterward, describing that process as an “interesting, but difficult task.”
Pending any fresh assault from Berlin, aid will be activated “by mutual agreement,” after choreographed legal maneuvers by the 27 states over the next two years.
Thursday’s stance represents the birth pangs of shared cross-border governance 12 years after experts said the creation of the euro was flawed because of the absence of a central government to control economic policy.
However, a call to debate the introduction of E-bonds — pooled financial guarantees allowing each and every euro nation to borrow funds for national use at common rates — was left for another day.
Merkel insisted the plan “would not rid Europe of its weaknesses, it would simply transmit them across the board.”