A temporary change and that will only work in an emergency. Germany has found a compromise regarding the strengthening of the financial firewall necessary to avoid the contagion of the debt crisis throughout the Eurozone. It seems that the finance ministers have decided on how to proceed with the merger of the temporary EFSF fund, expiring in July 2013, in the permanent ESM, the new state-saving fund which will come into force in July 2012. But the final decision rests with the Eurogroup which meets today and tomorrow in Copenhagen.
The German Finance Minister, Wolfgang Schaeuble, declared that the new bailout fund is permanent it will have a budget of “about 800 billion euros”. The Eurozone will anticipate the payment of the quotas of each member state without committing other funds which, at the time of its creation, will thus have an endowment of 500 billion euros. In addition, the 200 billion committed by the EFSF for Greece, Ireland and Portugal will be added directly, thus already reaching a sum of 700 billion. Yet in this way the EFSF still has 240 billion left: these will be added "virtually" in the ESM, i.e. they will continue to belong to the permanent bailout fund but until its expiry - in July 2013 - these 240 billion pThey may only be used by the ESM if necessary. The ceiling of the ESM thus reaches 940 billion.
If Schauble prefers not to say too much, the French finance minister has a completely different opinion, Francois Baroin: the new fund "the bigger it is, the less risk it will be used", he has declared. However, Schauble said he was confident that the efforts that eurozone countries are making to strengthen the lifebuoy will succeed in calming the debt crisis. But Spain must do more and accelerate reforms in the labor market.
