Merkel re­buffs In­ter­na­tional Mon­e­tary Fund call to raise res­cue fund

The Pak Banker - - Company& -

FRANK­FURT: In­ter­na­tional Mon­e­tary Fund chief Do­minique Strauss-Kahn will call on min­is­ters to boost the res­cue pool and urge the Euro­pean Cen­tral Bank (ECB) to step up its pur­chases of bonds to stem the cri­sis, ac­cord­ing to an IMF re­port.

How­ever, Ger­man Chan­cel­lor An­gela Merkel said she saw no need to in­crease the size of the bailout mech­a­nism.

She also said the Euro­pean Union treaty did not al­low for is­su­ing com­mon bonds, which would any­way re­duce the el­e­ment of com­pe­ti­tion and the in­ter­est rate in­cen­tive for fis­cal good be­hav­iour.

The ECB en­gi­neered a dip in the soar­ing bor­row­ing costs of weaker euro zone states late last week by step­ping up pur­chases of Ir­ish and Por­tuguese govern­ment bonds, ac­cord­ing to traders, and hint­ing it could do more.

But yield spreads over safe-haven Ger­man Bunds re­sumed their rise on Mon­day, as did the cost of in­sur­ing their debt against de­fault, and many an­a­lysts say only sus­tained, mas­sive cen­tral bank bond­buy­ing can re­verse the trend.

The IMF re­port says a re­cov­ery in the euro zone, led by strong growth in its largest econ­omy Ger­many, could "eas­ily be de­railed" by re­newed mar­ket turmoil and de­scribes pres­sure on so­called pe­riph­eral euro coun­tries as a "se­vere down­side risk." Wide dif­fer­ences re­main in the 16-nation sin­gle cur­rency area over how to over­come a debt cri­sis that has al­ready led to EU-IMF bailouts for Greece and Ire­land, and now threat­ens to spread to Por­tu­gal, Spain and pos­si­bly Italy.

Jean-Claude Juncker, chair­man of euro zone fi­nance min­is­ters, and Ital­ian Fi­nance Min­is­ter Gi­ulio Tre­monti out­lined a pro­posal in Mon­day's Fi­nan­cial Times for a joint sov­er­eign bond, or "E-bond", to send a sig­nal to mar­kets and cit­i­zens of "the ir­re­versibil­ity of the euro." Ger­man Fi­nance Min­is­ter Wolf­gang Schaeu­ble warned in a news­pa­per in­ter­view that the risk of an antieuro po­lit­i­cal party emerg­ing in Ger­many should be taken se­ri­ously. The euro has be­come more un­pop­u­lar among Ger­mans since this year's fi­nan­cial res­cue of heav­ily in­debted Greece, which ran counter to a "no bailout" prin­ci­ple es­tab­lished be­fore the euro was cre­ated in 1999.

The IMF re­port and the sit­u­a­tion on Euro­pean debt mar­kets will be dis­cussed at length, a euro zone source said, at the reg­u­lar Mon­day meet­ing of the so-called Eurogroup.

That will be fol­lowed by a meet­ing on Tues­day of min­is­ters from the broader 27na­tion Euro­pean Union, who are ex­pected to for­mally ap­prove an €85-bil­lion aid pack­age for Ire­land and dis­cuss the re­form of EU bud­get rules. One in­flu­en­tial econ­o­mist, Jim O'Neill, chair­man of Gold­man Sachs As­set Man­age­ment, said the idea of com­mon euro zone bonds made sense, and new ideas now emerg­ing would even­tu­ally un­der­pin Euro­pean mon­e­tary union with stronger cen­tral lead­er­ship. -PB News

IS­LAM­ABAD: Min­is­ter of State for In­for­ma­tion and Broad­cast­ing Syed Sum­sam Ali Shah Bukhari talk­ing to Dr. Sayed Makhdoom Ra­heen, Afghan Min­is­ter for In­for­ma­tion and Cul­ture at Be­nazir Bhutto In­ter­na­tional Air­port. -App

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