E.U. to create permanent financial safety net
European Union leaders agreed Thursday to create a permanent financial safety net to take effect by 2013, and the European Central Bank moved to increase its firepower to fight the debt crisis that has rocked the euro zone.
But at Germany's insistence, the 27 leaders said the long-term crisis-resolution mechanism, to be added to the E.U.'s governing treaty, would be activated only if it were "indispensable to safeguard the stability of the euro as a whole."
They also decided there was no need to increase an existing temporary rescue fund, which some analysts say could be insufficient if Spain and Portugal need E.U.-IMF bailouts after Greece and Ireland, nor did they discuss using it more flexibly.
The decision not to enlarge or even discuss enlarging the existing fund could be taken by financial markets as a sign of division, potentially provoking more market uncertainty. But leaders said they were prepared to do whatever it takes to protect the euro, a position they have reiterated for months.
"The heads of state and government of the euro zone stand ready to do whatever is necessary to ensure the stability of the euro zone as a whole," European Council President Herman Van Rompuy said at a news conference after the first day of a two-day E.U. summit.
IMF Managing Director Dominique Strauss-Kahn, who has been critical of E.U. leaders' disjointed response to the rolling crisis, said he was concerned about slow growth and the threat of contagion in Europe.
"I'm worried, and that's why I'm urging the Europeans to provide for a comprehensive solution because this piecemeal approach obviously doesn't work," Strauss-Kahn said during a Thomson Reuters Newsmaker event in Washington. "And the markets are just waiting for what's next."
On Thursday, the IMF's board approved a $30 billion loan to Ireland as part of the country's bailout. The fund's vote came a day after the Irish parliament ratified the rescue.