EU leaders set to announce €750bn Spain and Italy bailout deal‏

20 Jun

European leaders are poised to announce a 750 billion euro deal to bailout   beleaguered Spain and Italy by buying the countries’ debts.

Debt crisis: EU leaders set to announce €750bn Spain and Italy bailout dealLeaders of the world’s leading economies at the Pacific resort of Los Cabos, Mexico

Pan-European Government funds are set to be used to buy Spanish and Italian   bonds, which have recently hit record highs – in a move which will send a   strong signal to financial markets that the German administration is   prepared to back its weaker economic neighbours.
Angela Merkel and other European leaders have come under intense pressure at   this week’s G20 summit to take radical action to stem the growing euro   crisis which has pushed up the cost of Spanish bonds to unsustainable   levels.
Francois Hollande, the French President, said: “It will be more on mechanisms   that allow us to fight speculation”.
The French president said rates paid by Spain and Italy to borrow on debt   markets were “unacceptable”.
“We must show a much faster capacity for action,” Mr Hollande said.
Under the proposed deal, two European rescue funds – the 500 billion-euro   European Stability Mechanism (ESM) and the 250-billion euro European   Financial Stability Facility (EFSF) – will be able to buy bonds issued by   beleaguered European countries.

Previously, money in these funds – which has been provided by members of the   single currency – has been used to bailout smaller European countries such   as Greece, Portugal and Ireland. Governments in these countries are offered   money direct in return for agreeing to austerity programmes.

Under the new plan, the money in these funds will not be given directly to   governments but will instead be used to buy up debts on the financial   markets. The European Central Bank previously bought about 210 billion euros   of bonds in this way but stopped last year.

It is hoped that the new plan will drive down the cost of Spanish and Italian   bonds – by showing that the eurozone is prepared to stand behind the debts   of its members.

Experts said it was a step towards establishing shared Eurobonds, where debt   from across the single currency area is shared and effectively underwritten   by Germany.

George Osborne, the Chancellor, indicated that he was optimistic a deal could   be agreed.

“We will see what the eurozone announce over the next couple of weeks, but   there is no doubt that they realise that individual measures in individual   countries – like recapitalising Spanish banks and getting a Greek Government   that is in favour of staying in the euro and doing what is necessary to stay   in the euro – are not by themselves enough,” he said.

“These are systemic problems in the eurozone which require a systemic answer   and we need to see measures from the eurozone that help bring borrowing   costs down, that help ensure that there are common resources transferred   from richer countries to poorer countries, that the whole eurozone stands   behind the banks of the eurozone.”

He added: “The eurozone is inching towards solutions. Basically, we do need to   see the richer countries, like Germany like Holland, spend some of their   resource in propping up the weaker countries of the eurozone.

“Obviously it is difficult for them to do that, it is not a popular thing to   do but it is absolutely necessary.

“I think there are signs that the eurozone are moving towards richer countries   standing behind their banks and standing behind the weaker countries.”

The emergence of an outline rescue deal for Spain and Italy comes after   Spanish bond yields increased sharply to more than seven per cent in the   wake of the rerun of the Greek election last weekend.

1 Comment

Posted by on June 20, 2012 in International News


Tags: , , , , , , , , ,

One response to “EU leaders set to announce €750bn Spain and Italy bailout deal‏

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: