Friday, October 29, 2010

EU Bows to Germany's Call for Permanent Debt Mechanism, Snubs Vote Curbs

German Chancellor Angela Merkel won European Union backing for a rewrite of EU treaties to create a permanent debt-crisis mechanism by 2013 to prevent a repeat of the Greece-led shock that jolted the euro.

At a summit in Brussels, Merkel made less headway with calls to bar high-deficit countries from voting on EU decisions, dramatizing the limits of Germany’s power over the 27-nation bloc.

“All agreed that there has to be a permanent crisis mechanism,” Merkel told reporters early today after the summit’s first session. “All agreed that a limited treaty change will be necessary.”

Germany’s demands come as bond yields in deficit-strapped Ireland and Portugal inch higher, threatening to reignite concerns about government finances that brought the 16-nation euro to the brink of breaking up six months ago.

EU President Herman Van Rompuy said there was no discussion of a debt-rescheduling facility, leaving the European Commission to propose a structure for the crisis mechanism by December. The summit resumes at 11 a.m. today and wraps up this afternoon.

“The absence of a crisis mechanism almost brought down the euro,” Van Rompuy said. With the currency up 17 percent against the dollar from June’s four-year low, he said “we won the immediate battle of the euro, but the problems are not completely over yet.” The European currency bought $1.3943 at 2 a.m. Brussels time.

Biggest Contributor

As the biggest contributor to 860 billion euros ($1.2 trillion) in loans and pledges to stem this year’s debt crisis, Germany wants to head off speculation against sovereign debt by handing the bill for future bailouts to bondholders.

No comments:

Post a Comment