Paris Insight: EU Update - EuroGroup

by Véronique Queffélec on avril 3, 2012


Treasury Secretaries of the Eurogroup just met today to discuss about the European “Firewall” in Copenhagen.

After EU bailout for Greece, Europe needs to strengthen its firewall in order to provide relief for indebted Member States. These new measures are necessary to restore financial-market confidence in Spain and avoid the reinforcement of the crisis.

Key points:

  • The Monetary Union always rely on the EFSF to support financial difficulties of EU Member States: Treasury Secretaries agreed to keep EFSF which finances help programmes for Greece, Ireland, and Portugal.
  • They decided to complete EFSF (€ 200 billion), loans for Greece (€53 billion) and €49 million of the EU with the ESM (€ 500 billion) which will be active from July 2012. Therefore fighting force of the European Firewall is € 800 billion.
  • Some Members States, European Institutions and the FMI disagreed about the ESM amount:

France wanted € 1 000 billion, The European Commission and the IMF € 940 billion. However the satisfied country is Germany which militates for € 800 billion. Indeed, Germany has already spent a lot for indebted States since 2008 because of the Euro crisis and Angela Merkel faces to many critics. Moreover Germany threats that indebted Member States decrease their financial efforts thanks to European helps.

Key analysis:

  • With this new European measure the Eurogroup avoid the default of Spain which needs €300 billion to be refinanced on markets until 2014.
  • However the European firewall doesn’t protect Italy of a default: Italy needs a 600 billion until 2014.
  • The decision taken today in Copenhagen is insufficient for France who asked for (€1000 billion) but now Europe can launch new programmes and help Spain bank recapitalization.

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