Moves On Debt Contagion And Italy
- July 15th, 2011
- Posted by EUEditor
The body implementing the European Union debt relief system has this week agreed on steps for sustaining assistance to the Greek state, “to reduce the risk of the debt crisis spreading from Greece to larger member states such as Italy.â€
The Eurogroup, made up of the Finance Ministers of the 17 countries using the Euro currency, have been meeting in Luxembourg, working on the practicalities of measures agreed to by their Heads of Government – on the last occasion, at Brussels, on 25.6.11.
The debt relief project started early last year, building a permanent set of early-warning systems and financial mechanisms for heading off economic crisis – the European Stabilisation Mechanism. See EUAustralia Online, “Greece, Germany, Brussels …:â€, 18.3.10.
The Ministerial grouping released a statement on the latest initiatives, as renewed talk of the Greek government defaulting on its debt raised speculation about pressure on Italy – an economy contributing ten-times Greece’s share of production in the EU.
A decision to default, in Athens, would put pressure on banks holding deposits held as insurance against a default.
Decisions by the Eurogroup have to broker different claims on what needs to be done; with the government of Germany heading demands for private sector interests to take on more of the risk, for example through an extension of the time limit for payment of bonds.
The group said, 11.7.11, it had agreed on concrete measures, by strengthening the capacity of the Eurozone, the monetary union of the 17 states, to make the Greek debt more sustainable:
- “This strategy will provide the basis for an agreement within the Eurogroup on the main elements and financing of a second adjustment programme for Greece. Concrete measures that will be presented to ministers as soon as possible, include enhancing the flexibility and the scope of the bail-out fund, the European stabilisation mechanism (EFSF); lengthening the maturities of the loans, and lowering the interest rates for countries currently receiving bail-out loans from the EU, including through a collateral arrangement where appropriate…â€
On Ireland, which together with Greece and Portugal has been receiving aid with sovereign debt; the Eurogroup had a more positive report this week, stating:
“Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) visited Dublin from July 6-14 for the regular quarterly review of the government’s economic programme.
“The teams’ assessment is that the programme remains on track and is well financed. The authorities have continued to steadfastly implement programme policies. Recent developments are consistent with a return to positive growth in 2011…â€, it said.
Reference
EU Delegation, Canberra, “EU Economyâ€, European Union Delegation newsletter 314, 15.7.11. http://www.delaus.ec.europa.eu/, (15.7.11).
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