Malta reluctant to boost bailout fund

Malta is taking a very cautious position on whether the EU needs to top up the €440 billion bailout fund put in place last May to help eurozone countries facing financial difficulties.

Some member states, led by France, are moving a proposal for the current fund to be enlarged, mentioning the possibility of doubling it.

Although the proposal is being supported by the European Commission and the European Central Bank, Malta yesterday sounded a warning.

“We are extremely cautious on this proposal. We are not sure that right now there is a real need to enlarge the fund,” Finance Minister Tonio Fenech told The Times before the start of the eurozone finance ministers’ meeting in Brussels last night.

“Increasing the fund will mean further exposing the economies of the eurozone. For Malta this is quite difficult as we think that a €400 million exposure for a small economy like ours is already quite high.”

Although Malta did not fork out any money when it agreed to support the €440 billion fund last May, it still had to pledge a guarantee of €400 million as its share. This means if the fund is enlarged, Malta’s exposure would have to increase again, something the government is keen to avoid.

Mr Fenech said that for the time being it seemed the current fund, which from 2013 onwards will become permanent, was coping, so much so that both Portugal and Spain, earmarked as the next eurozone member states which might have to be bailed out, last week managed to raise funds on the international markets without the need to ask for EU help.

“Malta believes there are other options which the eurozone can consider before embarking on a further enlargement of the rescue mechanism,” Mr Fenech insisted.

Malta’s cautiousness is shared by other member states. Germany, the biggest eurozone economy, yesterday declared it would not support the proposal. German Finance Minister Wolfgang Schäuble said chan-ges should be discussed over time and there was no need for haste.

“Right now there is no need for this animated discussion,” he said, echoing German Chan-cellor Angela Merkel’s recent views that eurozone countries should instead push ahead with more fiscal consolidation, better coordinate economic policies and improve compe-titiveness.

The discussion among EU finance ministers is expected to drag on until this afternoon.