German Chancellor Angela Merkel indicated yesterday Germany was prepared to allow a boost in the eurozone’s firewall against the eurozone debt crisis ahead of talks on the issue by European finance ministers.
In an apparent shift of position amid fierce international pressure, Mrs Merkel said Berlin was open to combining €500 billion from a permanent rescue fund that comes into effect in July with €200 billion already promised to debt-ridden countries.
While insisting that the permanent fund, the European Stability Mechanism, should stay capped at €500 billion, “we could imagine... that it could run in parallel with the programmes already handed out – some €200 billion,” Mrs Merkel told reporters.
The two funds could run in parallel until the €200 billion is paid back by so-called “programme countries” that have already received bailouts – Ireland, Portugal and Greece, she said.
“This will take several years and then the ESM will stand alone with its €500 billion,” she explained.
This would potentially give the eurozone some €700 billion in funds to combat any possible future crisis – if for example a bigger country such as Spain or Italy were to require a bailout.
EU finance ministers are set to debate the issue during two days of informal talks in Copenhagen starting on Friday. Earlier yesterday, Amadeu Altafaj, spokesman for EU Economic Affairs Commissioner Olli Rehn, upped the pressure on ministers, saying:
“We think it’s essential that we come to an agreement at the end of this week in Copenhagen. Our baseline is very well known: we think that having a strong firewall in place is an element to reinforce confidence in our crisis response”.
Even the option now under consideration in Berlin is thought of as the least ambitious of the proposals put forward in Brussels.
The International Monetary Fund, the US and other top economies worldwide have sought to raise pressure on Germany to drop its previous opposition to boosting the eurozone’s firewalls against debt crisis contagion.