Talk of euro fund boost 'unnecessary': Germany

12th January 2011, Comments 0 comments

EU heavyweight Germany shot down on Wednesday proposals to boost Europe's war chest for financially stricken eurozone countries, saying such as a debate was not needed at the present time.

"The German government finds at the moment that it makes no sense, and first and foremost that it is unnecessary, to talk about expanding the rescue mechanism," government spokesman Steffen Seibert told reporters.

"This is not the time to announce to the world or to discuss publicly whether an expansion might be necessary some day," he told a regular government briefing.

"It would be good if there were a period of calm in Europe, if we didn't discuss on a daily basis all possible measures that might be needed in the future."

He said that just 10 percent of the 440-billion-euro (570-billion-dollar) European Financial Stability Facility (EFSF) had been used so far, bailing out Ireland in late 2010.

The temporary fund was created last May to provide cover for countries in financial distress after Greece became the first eurozone country to be rescued from the threat of bankruptcy.

The European Union agreed last month to create the permanent crisis mechanism to replace the EFSF when it expires in 2013.

The temporary fund totals 750 billion euros when contributions from the entire EU and the International Monetary Fund are added.

As Europe's biggest economy, Germany is the biggest contributor, and Chancellor Angela Merkel is wary of alienating voters ahead of seven state elections this year after unease about rescues of Greece and Ireland in 2010.

But analysts have repeatedly warned that the rescue fund needs to be bigger in order to calm nervous markets concerned that the debt crisis could spread to Portugal and even bigger economies like Spain, Belgium and Italy.

European economic affairs commissioner Olli Rehn said talks were underway with European Union member states on the possibility of increasing the EFSF and its successor, the European Stability Mechanism.

"We must ensure that the financial support mechanisms that were put in place last May are fit for the purpose," Rehn said at a conference on economic governance.

European Commission president Jose Manuel Barroso urged European leaders on Wednesday to give the fund more muscle by their next summit in February.

© 2011 AFP

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