Berlin thinks Italy economy too big for rescue fund: report

6th August 2011, Comments 0 comments

The German government fears that Italy's economy is too big to be rescued by the European stability fund, German weekly Der Spiegel is to report on Sunday.

According to the report, details of which were released before publication, doubts are growing within the German government that the 440-billion-euro ($625 billion) European Financial Stability Facility (EFSF) would be able to handle an Italian bailout.

The weekly said the German government is insisting that Italy resolve its debt problems on its own and that the EFSF is intended only to rescue smaller economies within the eurozone.

Italy has been battered on the stock and bond markets in recent weeks by investors concerned about its high public debt and anaemic growth, as well as signs of tensions within Prime Minister Silvio Berlusconi's centre-right coalition.

Contacted by AFP, a German finance ministry spokesman repeated a statement from Thursday that re-opening the debate about the size of the rescue fund "does not seem an appropriate solution to calming the markets."

That statement was released after European Commission head Jose Manuel Barroso called for a rethink of EU financial stability measures.

The EFSF has already been deployed for bailouts agreed for Ireland and Portugal, and will be used in the second Greek rescue package the EU is trying to finalise after it was agreed at the July emergency summit.

As of January 2013, a new 750-billion-euro European Stability Mechanism will take over from the EFSF.

© 2011 AFP

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