Berlin sees ‘no need’ to boost EU firewall fund

Berlin sees 'no need' to boost EU firewall fund
Photo: DPA
Germany reiterated on Wednesday there was no need to pour more money into the eurozone's crisis-fighting war chest, a week ahead of a crunch EU summit likely to be dominated by the issue.

Chancellor Angela Merkel’s spokesman told reporters in Berlin: “The position of the federal government has not changed. There is no need” to raise the volume of the European Stability Mechanism (ESM).

“We have agreed with our partners that we would look at the volume in March,” stressed the spokesman, Steffen Seibert.

Several top officials, including the head of the International Monetary Fund, Christine Lagarde, have called for the eurozone to boost the capacity of the ESM, currently set at a maximum of €500 billion ($661 billion).

One way leaders are considering doing this is by adding cash left over in the €440-billion European Financial Stability Facility (EFSF) that was due to be phased out in favour of the ESM in the summer of 2013.

However, Seibert noted that Italy and Spain are now able to borrow at much lower rates on the bond markets. Analysts were concerned that soaring bond yields in those major economies could prompt contagion throughout the eurozone.

“In this respect, we have a different priority as far as the ESM is concerned. We believe that we need to decide very soon in what form and in how many tranches we pay in capital to the ESM,” he said.

Germany was prepared to send a “strong signal” in this respect, he added.

Eurozone leaders will hold a special meeting on March 2 to discuss the currency’s debt firewall and elect a new eurozone boss, with EU president Herman Van Rompuy favoured to win the job.

Berlin has already indicated it might be ready to pay in its share of the €80 billion in hard cash in one lump sum, rather than in several tranches.


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