Monday, 10 May 2010

brussels: euro monster bailout nears $1 trillion


EU in monster eurozone aid deal, euro surges

1 hr 4 mins ago

BRUSSELS (AFP) – Europe on Monday agreed a package of crisis aid for troubled eurozone countries that Spanish finance minister Elena Salgado said could hit 750 billion euros with IMF involvement.

As the official announcement came through, the euro surged to 1.2907 dollars in Asian trade, up from 1.2755 dollars in New York late on Friday.

The fund would be made up of 440 billion euros from eurozone countries and another 60 billion euros of loan funds coming from the European Commission, with another 250-billion-euro facility added into the mix by the IMF.

Salgado and EU economic and monetary affairs commissioner Olli Rehn had initially said that IMF input would be of the order of 220 billion, but later said that the Washington lender would add half as much again as Europe.

The IMF's executive board approved a record 30-billion-euro loan Sunday for Greece, whose debt woes have shaken global financial markets.

The monster bailout "proves that we shall defend the euro whatever it takes," the European Union's commissioner for economic and monetary affairs, Olli Rehn, told a press conference after 11 hours of marathon Brussels talks.

The European Central Bank will also implement exceptional measures in support of a monster euro bailout package, Rehn said.

Japanese share prices also opened slightly higher, with the benchmark Nikkei-225 index gaining 34.46 points, or 0.33 percent, to 10,399.05 in the first minutes of trading.

Taxpayers face £13 billion bailout after Alistair Darling caves in

Alistair Darling has caved in to a demand that British taxpayers underwrite at least £13 billion of debt held by other European governments as EU finance ministers agreed an even bigger bail-out for the euro.

Bruno Waterfield in Brussels and James Kirkup
2:05AM BST 10 May 2010

Taxpayers face £13 billion bailout after Alistair Darling caves  in
Chancellor Alistair Darling Photo: REUTERS

The Chancellor, representing Britain until a new government is formed, was forced to participate in a £95billion "stabilisation mechanism" aimed helping European Union countries that face a debt crisis.

The decision followed a crisis meeting in Brussels to discuss the financial turmoil that has raised doubts about the future of the euro.

It exposes the British taxpayer to £9.6 - £13 billion in liabilities should Spain or Portugal go the way of Greece.

Mr Darling had no choice but to surrender because the decision was taken under a Lisbon Treaty "exceptional occurrences" clause that stripped Britain of its veto.

"I think it’s important that we do everything we can to stabilise the markets to show we’re coming through what is a difficult period," he said.

Britain last night succeeded in staying out of an even larger fund solely for the 13 countries using the euro.

The EU agreed a £624 billion rescue package of bilateral “special purpose vehicle” loans for the 16 euro zone states struggling to finance their debts.

As well as the loans, an extra £52 billion (€60bn) of new cash for a “stabilisation mechanism” will be raised by allowing the European Commission to use the EU budget as collateral on international debt markets.

Britain escaped being sucked into the wider bailout loans but was forced to underwrite the “stabilisation mechanism” which, added to an existing “facility” of £43 billion, makes British taxpayers liable for £13 billion of a new £95 billion (€110bn) fund.

Already indebted euro zone states will be on standby with £382 billion (€440bn) of loans, which will be topped up by an IMF contribution of £191 (€220bn).

As the official announcement came through, the euro surged in Asian trade having risen even in volatile early morning Asia-Pacific trade, hitting 1.2884 dollars in Tokyo, up from 1.2755 dollars in New York late on Friday.

Olli Rehn, the EU's monetary affairs commissioner, said the EU deal "proved that we shall defend the euro whatever it takes".

The measures were rushed through over the weekend to be in place when the markets open today. Yesterday President Barack Obama urged EU leaders to restore confidence in their economies.

European stock markets and the euro have fallen and government bond yields have jumped as investors fear that the large deficits run up by some EU countries will cripple economic growth.

Anders Borg, the Swedish finance minister, warned that the markets could fall even further. He said: "We now see wolf pack behaviours, and if we will not stop these packs they will tear the weaker countries apart."

The £95billion "balance of payments facility" will underwrite loans taken out by vulnerable states and will be supported by all 27 EU members. The European Commission has also tabled a proposal for a fund where states with strong credit ratings would underwrite loans taken out by struggling eurozone members.

Mr Darling said Britain would not provide support for the single currency, but Sweden, another influential non-euro country, called that stance into question, saying it would "not rule out" being part of the wider fund.

Separately, the European Central Bank is later expected to announce that it will buy up Spanish and Portuguese government bonds at premium rates even if they are junked by markets.

EU Crafts $962 Billion Show of Force to Halt Crisis

James G. Neuger and Meera Louis

May 10 (Bloomberg) -- European policy makers unveiled an unprecedented loan package worth nearly $1 trillion and a program of securities purchases as they spearheaded a drive to stop a sovereign-debt crisis that threatened to shatter confidence in the euro. Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, governments of the 16 euro nations agreed to make loans of as much as 750 billion euros ($962 billion) available to countries under attack from speculators.

The ECB will also embark on “very significant operations,” European Union Economic and Monetary Commissioner Olli Rehn told reporters in Brussels after the 14-hour meeting. “The ECB has taken a decision to intervene in the secondary markets of government securities.”

Under pressure from the U.S. and Asia to stabilize markets, the European governments gambled that the show of financial force would prevent a sovereign-debt crisis and muffle speculation that the 11-year-old euro might break apart.

Europe’s failure to contain Greece’s fiscal crisis triggered a 4.1 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.’s collapse. It prompted President Barack Obama to call German Chancellor Angela Merkel and French President Nicolas Sarkozy yesterday to urge “resolute steps” in Europe to prevent the crisis from cascading around the world.

Under the loan package, euro-area governments pledged to make 440 billion euros available, with 60 billion euros more from the EU’s budget and as much as 250 billion euros from the International Monetary Fund, said Spanish Economy Minister Elena Salgado.

“We are placing considerable sums in the interests of stability in Europe,” Salgado told reporters after chairing the meeting.

To contact the reporters on this story: James G. Neuger in Brussels at; Meera Louis in Brussels at

Last Updated: May 9, 2010 21:06 EDT

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