Eurozone finds £421bn crisis cash
Published 15/02/2011 | 04:22
European finance ministers have agreed to find more than £420 billion for a new crisis fund, but continued to argue over the best way to combat the debt crisis that has crippled the eurozone over the past year.
The ministers "agreed on the provisional volume of 500 billion euro, which will be revised every other year", said Jean Claude Juncker, the prime minister of Luxembourg who chairs the regular meetings of the 17 eurozone finance ministers.
The fund, called the European Stability Mechanism, will come into force in 2013.
Additional financing will come from the International Monetary Fund, which is already contributing one third of the region's existing 750-billion-euro (£631 billion) crisis fund.
While Mr Juncker did not say how much money would come from the IMF in the future, the European Union's monetary affairs commissioner Olli Rehn said it was an "unwritten understanding" that the fund would provide 31p for every euro spent by the eurozone members.
The European Stability Mechanism will succeed the European Financial Stability Facility, the eurozone's 440-billion-euro (£370 billion) contribution to the overall fund, in 2013.
While the decision on the new mechanism is a big step in showing that the currency union is prepared to stick by its weaker members, immediate investor concern centres on the eurozone's ability to deal with the existing crisis.
Ministers did not reach a decision on boosting the size and powers of the exciting facility, which at the moment can only give about £210 billion in loans because of several capital buffers required to make the bonds it issues to raise money attractive to investors.
Mr Juncker said that the £421 billion promised to the new mechanism would constitute its effective lending capacity and would not be diminished by capital buffers.
Eurozone chiefs have promised to present a "comprehensive response" to the debt crisis by the end of March.