• European Financial Stability Facility

    Eurozone finance ministers indicated that they were prepared to grant their common bailout fund, the European Financial Stability Facility (EFSF), more resources and greater power to intervene in order to prevent the debt crisis from spreading to major economies such as those of Spain and Italy.

     

    “We are fully aware that Italy and other countries are in the focus of a part of the financial markets and we believe that [our] general statement … is offering an adequate response,” Luxembourg Prime Minister and Eurozone chairman Juncker said.

    All Eurozone members also proposed lowering interest rates and extending the maturity on loans to nations such as Greece.

    Although the eurozone nations were meeting in Brussels to discuss the participation of private sector banks and financial institutions in the re-structuring of Greek debt, there was no indication that they had come to a consensus on the issue.

    Germany, the Netherlands and Austria have indicated that they are prepared to support a second aid package for Greece, which is expected to total around 110 billion Euros, provided that private creditors are willing to voluntarily contribute.

    It is unclear, however, whether credit rating agencies would equate private sector participation in a debt-restructuring plan as equivalent to a default.

    “There will be no government intervention in the private sector. This would have disastrous consequences,” said Austrian Finance Minister Maria Fekter.

    Greek Prime Minister George Papandreou called on the European Union to move decisively and speak with one voice in order to prevent the debt crisis from spreading.

    “There is no room for indecision and mistakes … such as allowing cacophony to substitute for a common agenda and create more panic than security,” Papandreou said in a letter addressed to Juncker.

    “Today, there is a greater need to avoid the mistakes of the past … a strong and visionary European leadership is called for.”

    OEIC staff