The European Union president has announced that the effective lending capacity of the eurozone's debt rescue fund will be bolstered, saying this measure would allow the bloc 'to finally turn the corner.'
Eurozone leaders want more emergency lending power
Eurozone leaders agreed in the early hours of Saturday morning, March 12, to increase the lending power of its massive debt rescue fund, and to improve economic policy coordination across the bloc. The late-night summit - following on from Friday's emergency meeting on Libya - also concluded that the repayment terms of Greece's emergency loans package should be eased, but offered Ireland's new government no such deal.
European Union President Hermann van Rompuy said the agreements, which are set to be finalized at a full EU summit on March 24 and 25, "should allow us to finally turn the corner" on a debt crisis that once looked set to bring the European single currency to the brink of collapse.
The European Financial Stability Facility (EFSF) is effectively a 440-billion-euro ($611-billion) safety net, established by eurozone leaders after Greece was given emergency loans last May, ready to help future countries in need. However, currently the fund can only effectively make some 250 billion euros available to debt-laden eurozone countries.
"We will make sure that the full amount is available; 440 billion euros for the [current system of loan guarantees] and 500 billion for the [planned permanent replacement, due in 2013,]" van Rompuy told reporters after the summit.
The eurozone leaders also agreed to give the fund more financial flexibility, allowing it to purchase bonds directly from countries that run into financial difficulties, in return for strict conditions on economic reforms within the affected country.
This bolstering of the EFSF's practical power received the blessing of the president of the European Central Bank, Jean-Claude Trichet, who described the meeting's outcome as "a step in the right direction."
Merkel gets her "Euro Pact" wish
Merkel and Sarkozy lobbied strongly for the Euro Pact
Germany had been pushing for some time for the eurozone to adopt a "Euro Pact," which would encourage closer European cooperation in working towards four main goals - competitiveness, employment, sustainable public finances and improved financial stability.
"All 17 leaders of the eurozone are convinced that their economies need to be more competitive and more convergent,” van Rompuy said. "This is key," van Rompuy said.
Chancellor Angela Merkel had called for this to be implemented as a counterweight to a bolstered rescue fund. The idea is that with similar goals, obeying similar rules, eurozone states will gradually begin to get their debt problems under control without needing to call for help.
Van Rompuy conceded that the objectives were nothing new or ground-breaking, but said that the will to achieve them was now unified across the bloc. The EU president said the Euro Pact "expresses everybody's strong political commitment to do what is required for our common good, the euro."
Greek loan conditions eased, Irish terms unchanged
Ireland may want better rates, but Europe says Kenny hasn't earned them
Greece, the first eurozone country to run into debt trouble, was also granted two concessions on its repayments, with European leaders praising the country's progress implementing economic reforms to bring down its deficit.
Interest rates on the emergency loans granted to Greece were reduced by 1-percentage point, and the country was awarded seven years to repay its debts to the EU and IMF, rather than the initial period of three-and-a-half years.
Ireland, however, was not granted similar concessions, despite a combative appeal from the country's new prime minister, Enda Kenny, who campaigned on a promise to renegotiate the terms of the country's rescue package.
"They haven't met all the conditions," van Rompuy said after the meeting.
Kenny said he was prepared to fight for "weeks" to secure a better rate on its 67.5-billion-euro loans from the EFSF, arguing that the Irish electorate had given him a mandate for this in the country's recent election.
Kenny's European counterparts, meanwhile, said they would only consider lowering Irish interest rates if the country agreed to their request to raise its favorable business tax rates, bringing them into line with other eurozone members.
Author: Mark Hallam (AFP, AP, dpa)
Editor: Toma Tasovac