Eu­ro­zone must do more to boost sin­gle cur­rency, IMF warns

The Pak Banker - - Company& -

BRUS­SELS: Euro­pean lead­ers came un­der pres­sure to boost the €750bn (£635bn) res­cue fund for the euro when the head of the In­ter­na­tional Mon­e­tary Fund (IMF), Do­minique Strauss-Kahn, warned fi­nance min­is­ters that not enough was be­ing done to shore up the sin­gle cur­rency.

But Ger­many, which would be li­able for the biggest share of any in­crease in the emer­gency fund, led re­sis­tance to the pro­pos­als and is likely to op­pose calls for the Euro­pean Cen­tral Bank buy up trou­bled govern­ment bonds in the eu­ro­zone. Ahead of an EU fi­nance min­is­ters meet­ing in Brus­sels to­mor­row, the 16 gov­ern­ments us­ing the euro met to con­sider steps to con­tain the con­ta­gion threat­en­ing the sin­gle cur­rency. They agreed an €85bn bailout for Ire­land last week and an­nounced that the cur­rent tem­po­rary emer­gency fund would be turned into a per­ma­nent Euro­pean sta­bil­ity mech­a­nism by mid-2013.

Gov­ern­ments were draft­ing poli­cies and op­tions for an EU sum­mit next week amid fears that the 10-month euro cri­sis was mov­ing into a dan­ger­ous new phase. StraussKahn at­tended to­day's meet­ing of eu­ro­zone min­is­ters in Brus­sels to de­mand a more pro-ac­tive role by the ECB in buy­ing up the bonds of trou­bled gov­ern­ments and to call for a large in­crease in the res­cue fund set up in May. The EU has al­ready launched bailouts worth nearly €200bn for Greece and Ire­land. The cur­rent fund would suf­fice to come to Por­tu­gal's res­cue, the weak­est link in the euro. But if at­ten­tion then fell on Spain, the EU's fourth biggest econ­omy, the res­cue kitty would be empty. The meet­ing came as the ECB re­vealed that it had spent €1.965bn buy­ing govern­ment bonds in the week lead­ing up to last Tues­day, up from €1.345bn the week be­fore and the high­est weekly amount in months. An even big­ger in­crease is ex­pected to show up in next week's fig­ures, af­ter ECB pres­i­dent Jean-Claude Trichet hinted last week that the bank would buy more bonds in an ef­fort to lower bor­row­ing costs for weaker eu­ro­zone coun­tries such as Greece, Ire­land and Por­tu­gal. De­spite the pres­sure from the mar­kets for a co­her­ent and con­vinc­ing mes­sage on the eu­ro­zone's prob­lems, the sig­nals yes­ter­day were ca­cophonous. The head of Bel­gium's cen­tral bank, Guy Quaden, said he sup­ported calls to in­crease the res­cue fund. Chan­cel­lor An­gela Merkel of Ger­many re­torted there was no need for that, nor for the "e-bonds" (com­mon EU bonds is­sued by a new Euro­pean debt agency) called for by Lux­em­bourg and Italy.

"It is our firm con­vic­tion that the treaties do not al­low joint eu­robonds, that is no uni­ver­sal in­ter­est rate for all Euro­pean mem­ber states," Merkel said. Eu­robonds would en­trench Ger­man re­spon­si­bil­ity for the bor­row­ing of weaker and more prof­li­gate coun­tries. They would raise the costs of Ger­man bor­row­ing and could trig­ger a back­lash in a coun­try where re­sent­ment at hav­ing to bail out more feck­less gov­ern­ments is al­ready run­ning high. -PB News

KARACHI: A del­e­ga­tion of ulema in­clud­ing schol­ars from Jamia Bin­noo­ria meet­ing with US Am­bas­sador Cameroon Munter at Na­tional Mu­seum of Pak­istan. -App

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