Malta yesterday signalled it was ready to approve a bigger Eurozone firewall, even though the issue is not officially on the agenda of the two-day EU summit which started yesterday in Brussels.
Diplomatic sources close to the government said “Malta will be able to live with the proposal of boosting the EU’s bailout fund”.
This would be done by merging the current temporary mechanism, known as the European Financial Stability Facility (EFSF), with the permanent fund, the European Stability Mechanism (ESM), and would be in place by June.
The move, supported by the International Monetary Fund (IMF) and the European Central Bank (ECB), was supposed to be decided at this summit but was postponed by a few weeks due to the opposition of Germany.
However, both European Commission President José Manuel Barroso and the President of the Eurogroup Jean Claude Junker yesterday reiterated their position that the decision on merging the two funds was a necessary one and was only postponed by a few weeks.
“Malta agrees with the proposal if this contributes towards more stability in the eurozone,” a senior government official told The Times last night.
“For us, this will not mean any added financial burdens as we are already committed to the two funds. Malta will be paid commercial interest rates for any of its money used in eventual loans.”
Malta’s share in the two funds is estimated to reach some €700 million – mostly as guarantees.
Most European leaders would like to see the EFSF and its planned successor, the ESM, combined so as to have sufficient firepower in case a big economy such as Italy or Spain needed to be saved.
The EFSF alone, which started off with a lending power of €440 billion, is thought to have €250 billion left following rescues of Portugal and Ireland. Combining it with the replacement permanent crisis fund, the ESM, would beef up its firepower to €750 billion.
Germany’s Chancellor Angela Merkel still holds the position, however, that the current amount tabled for the ESM, €500 billion, is enough.
The economic summit, as it is traditionally known, is also discussing ways to boost growth in the EU as the green shoots of an economic turnaround seem to be making an appearance.
According to draft conclusions seen by The Times, EU leaders will agree to boost their efforts towards the implementation of important economic and social goals known as the EU 2020 strategy.
“While important measures have been taken by all member states, reforms in certain areas are lagging behind and implementation is uneven,” the draft conclusions state.
“It is of the utmost importance that member states fully reflect these priorities and challenges ,” EU leaders are expected to state.
Prime Minister Lawrence Gonzi yesterday reiterated Malta’s commitment to the reforms needed to reach its EU 2020 targets.
These include an increase in employment rates, cutting down the number of early school leavers and the consolidation of the island’s public finances.