Berlin, Brussels clash on euro crisis fund

16th January 2011, Comments 0 comments

A war of words between Brussels and Berlin over the eurozone crisis fund intensified Sunday as the European Commission president called on Germany to respect its role as it seeks to boost the pot.

"I expect top German politicians to respect the role of the commission. We in the commission have not only the right, but also the duty, to tell Europe's citizens what we think is right," Jose Manuel Barroso told Spiegel magazine.

Brussels wants to boost the 440-billion-euro (589-billion-dollar) European Financial Stability Facility (EFSF) to reassure nervous markets the stability of the eurozone "is not in question", a move slammed by Europe's top economy.

"Up until now, only a small percentage of the rescue fund has been used. So, in the government's view, there is no need to expand it," Foreign Minister and Vice-Chancellor Guido Westerwelle said in the Tagesspiegel am Sonntag weekly.

"I do not understand Barroso's comments. If only a small part of the fund has been used, then there is no need to discuss making it bigger," he added.

When combined with 250 billion euros from the International Monetary Fund and a further 60 billion euros from the whole EU, the entire package is worth 750 billion euros.

So far, only debt-wracked Ireland has needed to tap the fund but analysts fear it would be insufficient if bigger countries, such as Spain or even Italy, needed to use it.

The row is likely to dominate a meeting of eurozone finance ministers beginning on Monday.

However, in a sign that Berlin was prepared to compromise, Finance Minister Wolfgang Schaeuble spoke Sunday of increasing the effective lending capacity of the crisis pot.

The EFSF's actual lending capacity is estimated at only 250 billion euros as some of the fund must be kept in reserve to secure a top rating when it borrows money on the markets.

"We must and we will solve this problem," the minister told the Frankfurter Allgemeine Sonntagszeitung weekly.

© 2011 AFP

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