Netherlands Joins Germany In Opposing Larger EU Bailout

Marketwatch

This is not good late-afternoon news for European equity and bond markets.

AMSTERDAM -(MarketWatch)- The Netherlands joined Germany Monday in warning against boosting the volume of the euro zone's rescue fund, saying it won't solve the problems in the currency area, and it even may hurt the solvency of guarantornations.

In a letter to lawmakers, Finance Minister Jan Kees de Jager said that an increased European Financial Stability Facility is "no panacea" to solve the mounting troubles in the euro zone. "Any significant increase of the EFSF can...have consequences on the creditworthiness of guarantor nations," he said.

A bigger EFSF therefore shouldn't be seen as an alternative to achieving structural reforms and debt sustainability, he added.

His comments echoed those of German officials, who earlier Monday voiced similar statements. A spokesman for German Chancellor Angela Merkel said the fund will stay as agreed at a July 21 euro zone summit. "The EFSF will remain what it is, and keep the volume it had before July 21," he said at a press conference, removing hopes of a more robust EFSF.

The positions of Germany and the Netherlands clash with the European Commission, which has called for a massive increase in the EFSF's current lending capacity of EUR440 billion guaranteed by euro-zone governments.

Market watchers have said a new volume of up to EUR1.5 trillion or more might be needed to reassure investors that the fund can offset threats to the solvency of governments.

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Dutch voters agree with the government.

Forbes

AMSTERDAM -- A poll published in the Netherlands says Dutch voters are against contributing additional money to Europe's proposed stabilization fund by a 2-1 margin.

The poll asked the question "Do you think the European fund should be expanded so that Spain and Italy are less vulnerable to attack?" The question referred to new commitments to the European Financial Stability Facility, or EFSF, and "attack" by investors selling Italian and Spain bonds due to increasing concerns over their risk of default.