Sun, Mar 13, 2011 page11

• Eurozone agrees to boost defenses

  • AFP, BRUSSELS
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  Eurozone leaders agreed yesterday to boost defenses against a destabilizing debt crisis stalking weaker members by strengthening a debt rescue fund and increasing economic policy coordination.

  European Council President Herman van Rompuy said the agreements, to be finalized at a full EU summit from March 24 to March 25, “should allow us to finally turn the corner” on a crisis that has tested the whole euro project to breaking point.

  Van Rompuy spoke after drawn-out talks, which saw testy exchanges between new Irish Prime Minister Enda Kenny and his colleagues over the terms of Dublin’s debt rescue.

  

  President of the European Council Herman van Rompuy of Belgium gives a news conference yesterday at the end of an long negotiation with European heads of state in Brussels.

  Photo: EPA

  Greece meanwhile earned praise and easier repayment conditions.

  After Greece was bailed out last May to save it from a debt default, the EU set up the European Financial Stability Facility (EFSF) with funds of 440 billion euros (US$610 billion) to help others in need.

  The EFSF, however, can in practice only make about 250 billion euros available, but this will be increased to a full 500 billion euros under the permanent European Stability Mechanism (ESM) that will replace it in 2013, van Rompuy said.

  The systems will also be allowed to buy up government bonds directly, providing another important source of funds for countries facing funding problems.

  These changes have been in the pipeline for some time as the financial markets have heaped pressure on weaker eurozone states struggling to raise fresh money to help stabilize their public finances.

  Van Rompuy said the meeting had also adopted a “Euro Pact,” which “expresses everybody’s strong political commitment to do what is required for our common good, the euro.”

  “All 17 leaders of the eurozone are convinced that their economies need to be more competitive and more convergent. This is key,” he said.

  Germany, Europe’s powerhouse economy, had wanted progress on the agreement and especially its policy convergence provisions in return for increasing the funds available to the EFSF and ESM.

  The pact covers four areas for closer cooperation — competitiveness, employment, sustainable public finances and reinforcing financial stability.

  Individual states will be responsible for specific measures — an important caveat for smaller members jealous of their independence — but they are all supposed to work towards these same goals.

  Agreement had at one stage looked uncertain as the talks dragged on, held up by sharp exchanges between new Irish Prime Minister Enda Kenny and his peers over Dublin’s request to renegotiate the terms of its bailout.

  Ireland has “not yet met all the required conditions,” Van Rompuy said, adding: “They haven’t met all the conditions, so can’t have reduced interest rates.”

  Kenny warned he would fight for “weeks” to get the rates on Ireland’s bailout reduced as his eurozone partners agreed to cut the cost for Greece’s package by a full percentage point and extend its repayment to seven-and-a-half years from three years.

  Kenny insisted he had a strong mandate from Irish voters to cut the 5.8 percent rate Dublin pays on its 67.5 billion euros of loans, but his fellow leaders wanted him to bring Ireland favorable business tax rates up to their level in return.
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