Lagarde urges limits on bailout impact on private invesotrs
A new European financial rescue mechanism should not automatically entail that private investors share the cost of a bailout, French Finance Minister Christine Lagarde said Thursday.
Private investors "shouldn't be implicated in the consequences of assistance programmes except on a case by case basis," said Lagarde, as "as each situation will be different."
Lagarde told French lawmakers that talks were ongoing on creating a successor to the 440-billion-euro (590-billion-dollar) European Financial Stability Fund after it expires in 2013 following German proposals.
German officials including Chancellor Angela Merkel have also pointedly stated that bond holders should bear part of the cost of future bailouts of countries in financial dire straits, triggering market turmoil that helped push Ireland into seeking a rescue.
"We are working on it because we have a certain number of principles we want recognised, notably that a mechanism, under a hypothesis where it includes the private sector, should only be applied on a case by case basis," said the minister.
Lagarde said France would also want the rules to conform exactly to those of the International Monetary Fund to avoid differential treatment of creditors.
Merkel and President Nicolas Sarkozy were due to hold talks by phone later on Thursday, with the German business daily Handelsblatt reporting that the German proposal was running into opposition in Europe, including from France.
The head of the Eurogroup, Jean-Claude Juncker, also expressed concern about Germany trying to impose a solution on a follow-on crisis mechanism.
"Berlin doesn't have to impose on the rest of us a permanent crisis resolution mechanism for the eurozone. Everybody wants one. Why we need to pretend today that only one country wants one is a mystery," Juncker was quoted as saying in the regional German weekly Rheinischer Merkur.
"What I am concerned about is that the joint method, that is to say a joint decision is taken by all of the members of the European Union, is not discredited in favour of an intergovernmental method, which would see the big states decide things between themselves."
© 2010 AFP