jueves, 10 de marzo de 2011
Eurozone leaders to begin crucial bail-out fund talks
Europe's lenders don't like what they are hearing on the Brussels grapevine.
The driving factor is the worry that the summit set up expressly to forge a firm and permanent agreement between the 17 will end with a fudge.
That worry has send the interest rate on the Portuguese government's 10-year bonds back to record highs.
Italy, Spain and Greece's governments are also being hit hard by high borrowing rates.
This emergency summit has been long awaited, but the fear is that all the tricky stuff setting out the terms that will underpin any future bail-outs from 2013 will probably be put back once again to be discussed further at the next full EU summit on 24 and 25 March.
Squeezed session The agenda arrangements themselves don't bode well.
The emergency euro summit has now been squeezed into a late afternoon session because of the Libyan emergency.
But it's not just a case of there being too little time to thrash out an agreement. Diplomats and other sources have been carefully managing down commentators' expectations.
What has been agreed in principle by finance ministers is that the new permanent bail-out fund, the European Stability Mechanism (ESM) - which is designed to replace the current European Financial Stability Facility (EFSF) - will hold a total of 500bn euros ($690bn; £430bn).
This will be topped up by the IMF, but the markets are concerned that it won't be enough should Portugal and Spain both need to be bailed out in the near future.
It is if, or when, the permanent bail-out fund starts to prove inadequate that the question of the future oversight of national economies becomes crucial.
Large members such as Germany and France may not be prepared to cough up further if they have little influence on the peripheral countries' spending habits.
So what is the mechanism for sorting all this out and how is it going down?
In two words: Not well.
Bankroller Germany, the eurozone's biggest single rescue bankroller, got the ball rolling and managed to win French support for a pact to tighten rules on state spending all round the eurozone.
This plan was big on reforms to boost competitiveness with the best performer to be used as a benchmark for others to emulate.
Germany also wanted things like wages indexed to inflation, higher retirement ages and borrowing limits, something that would prove very hard to sell to voters.
The pact idea was taken up with enthusiasm by the European Commission - but watered down - especially when it came to the provisions relating to competition.
Now, the word is that even this version is causing disagreement.
In particular, there appears to be less emphasis on the degree of oversight member countries would allow each other. The problem here is that the more the plan moves away from Germany's original concept, the less likely Germany may be willing to sign off a deal.
Many other related issues are pressing in on the 17 eurozone members.
The Greek and Irish premiers will continue to press the rest to agree for easier terms on their bailout loans.
Fundamental flaw The ECB President Jean-Claude Trichet will also be at the summit. He's been desperately trying to ease up on the central bank's expensive daily support buying of weak eurozone countries' debt - notably that of Portugal.
One partial solution could be to allow the future rescue fund to be more flexible, so it too could buy the likes of Portuguese bonds.
But Germany is implacably opposed to that idea.
The eurozone countries are, essentially, grappling here with the fundamental flaws in the Euro project itself.
Ultimately, only more economic discipline enforced from the centre can probably ease those troubled debt markets.
But Friday's summit may once again see the divergent interests of Germany, France and the poorer peripheral countries getting in the way of a breakthrough.