EUROZONE UPDATE - Think Tank Says Bailout Fund Will Need $6 Trillion And France Will Lose AAA Rating
Pardon while we chuckle, because $1 trillion, let alone $6 trillion, is never going to happen in Europe. Where do they plan to get the money, Euro Claus?
Consisdering that the current proposal being voted on by all 17 Eurozone members calls for a fund of less than $500 billion, this new number, though more realistic in terms of the size needed to fix the problem, is a political impossibility, especially given the popular resistance among voters in France and Germany to bailouts for irresponsible neighboring countries.
Excerpt:
Many European policymakers are beginning to envisage the fund, known formally as the European financial stability facility, as a nascent eurozone treasury that could sit alongside the European Central Bank. It would be quickly tapped to deal with crises without relying on national parliaments, which cannot act at the speed demanded by markets.
Senior officials have even begun referring to this future construction by a new name, the European Monetary Fund, which would operate like many other European Union institutions – with decisions taken by a qualified majority vote rather than unanimity. Such proposals will feature in a review of eurozone governance overseen by Herman Van Rompuy, the European Council president, next month
Daniel Gros, director of the Centre for European Policy Studies think-tank, estimated that under some scenarios, the EFSF – and its successor, a permanent agency called the European Stability Mechanism – would have to be as big as €4,000bn ($5.6 trillion).
Such an increase would mean France, whose triple A rating is essential to the market credibility of the EFSF, would see its debt levels rocket, at a time when its bond rating is already under scrutiny. “It’s just not conceivable to have a much larger EFSF and still have France as triple A,” said Mr Gros.
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DB here. Meanwhile UK Prime Minister David Cameron is in the news today calling for "a big bazooka approach to bailouts" warning they have only a few weeks to avert economic disaster. And Merkel and Sarkozy met again today and claim to have reached agreement on a massive EURO bank bailout, though neither would release details.
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Oct 10, 2011 at 12:19 AM
Reader Comments (7)
good old US will have fed print up 6 trillion $ to go with the 3 trillion US gave a few yrs ago, just add it to the bill on US kids back.
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You got me. It was late and I read it as Pounds not Euros and did the calculation that way. Should be around $5.5 trillion. My mistake and good catch.
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H. Onno Ruding, Chairman of the CEPS Board of Directors, Former Minister of Finance of the Netherlands, Former Member of the de Larosière Committee on Financial Supervision
Ferdinando Beccalli-Falco, President and CEO, GE International
John Bruton, Former Prime Minister of Ireland, Former Ambassador of the EU to the US
Erik Belfrage, Senior Vice-President, SEB
Hans Skov Christensen, Director General, Dansk Industri
Viscount Étienne Davignon, Vice-Chairman, Suez-Tractebel, Former European Commissioner
Baron Philippe de Schoutheete de Tervarent, Professor, Institut d’Etudes Européenes, UCL, Former Belgian Ambassador to the EU
Lord Simon of Highbury, Member of the House of Lords]]
Prince Nikolaus of Liechtenstein
Stefano Micossi, Director General, Assonime
Jean-Dominique Percevault, President-Directeur Général, Services Petrolier Schlumberger
Pedro Schwartz, President, IDELCO
Josef Tosovsky, Chairman, Financial Stability Forum
Norbert Wieczorek, Former Leader of the SPD Fraktion, German Parliament
Daniel Gros (ex officio), Director, CEPS
Karel Lannoo (ex officio), Chief Executive, CEPS