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How to stop the Euro Crisis….and to avoid the worst ?

Posted on Thursday, 27th October 2011 @ 03:29 PM by Text Size A | A | A

In France, Prime Minister François Fillon raised the stakes on Tuesday preventing that failure with the European Council discussions “Could push the European continent to unknown lands.”

A new European summit in Brussels will address today two main questions that are burning, the recent measures of European banks recapitalisation and the ability to boost the amount of EFSF from 440 billion to 1 trillion euros.

The ESFF (European Stability Financial Fund) is an emergency fund created in this emergency fund is the star of the European discussions on the future of the euro area.

Wolfgang Shauble, the German minister of finance said “There are no discussions on a bearing (capacity) in excess of 440 billion euros, that’s it, finito, basta,” he said, adding thought that one solution would be found in the coming days (Reuters).

The ESFF is a securitization fund established in May 2010 to assist countries of the European Union in financial difficulty to maintain stability. The fund also has the ability to buy government bonds under certain conditions, as was the case for Greece during the last bailout, this summer, to the tune of 25 billion. This implies a reduction of facial Greek debt because the EFSF bought, in fact, these obligations on behalf of Greece at a price below their face value. In addition, the maturity of loans is extended to 15 years and the interest rate on its loans it is lowered to 3.5%. This fund cannot, however, operate as a bank and any intervention requires the unanimity of member states of the Eurogroupe and the ECB.

The IMF could also be involved in first aid with a capacity of up support “to 750 billion € if necessary. But is this the will of the Member States of the European Union? SWFs (Sovereign Wealth funds) in some states could then help European banks to avoid the worst and calm desires of certain high-growth countries such as China and high purchasing power such as Qatar.

 

By Rahma RachdiEuroLogo

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