According to the press service of the German Finance Ministry, it is unreal to increase the European Stability Mechanism (ESM) four times – from 500 billion to two trillion euros. This denial was a response to the article in Der Spiegel about the negotiations on this issue, and Germany has already spoken for the ESM increase.
Martin Kotthaus, the representative of the German Ministry of Finance in Brussels, said there were talks going on in Brussels about leveraging the capacity of the European Stability Mechanism (ESM) in the same way as its predecessor, the European Financial Stability Fund (EFSF). But, asked about a report in the German media, that the ESM’s capacity could be 4 times leveraged to 2 trillion euros through the intervention of the private sector, he said this was “illusory”. “It is not feasible to talk about figures at present,” Kotthaus told reporters. “It is purely abstract.”
ESM treaty was conceived as the euro zone’s permanent bailout fund and will enter into force if it is approved by the Member States representing 90% of eurozone capital subscription at the European Central Bank. The ESM was assumed to come into force on July 1, 2012. But the deadline was postponed due to delays in the ratification procedures in a number of euro zone countries, including Germany, where ESM was first acknowledged by the Constitutional Court.
In September 2012, the German Constitutional Court admitted that the ESM permanent euro-zone bailout fund and fiscal pact ESM European Union (EU) do not contradict the legislation of the country under certain conditions. The German Constitutional Court demanded that German liabilities within the mechanism not exceed 190 billion, without the approval of the lower house of the German parliament. In addition, both houses of the German parliament should be informed of the decisions taken in the ESM.
On September, 14, Eurogroup chair Jean-Claude Juncker announced that the ESM will be operational in October 2012 and will provide the first three tranches of the total 32 billion euros. According to Angel Gurría, Secretary-General of the Organization for Economic Cooperation and Development (OECD), Eurozone bailout funds need to be increased to at least €1 trillion as soon as possible. “Greece was the first and most urgent step. But the challenges remain daunting. We need to construct a stronger financial firewall. And this wall must be high, strong, and sufficient enough to deter speculations and must be undebatable in action “- said Angel Gurria.
At the same time, according to a financial advisor Dmitry Chernavski, the ESM increase does not solve the fundamental problems of the debt crisis in Eurozone. The debt crisis in Europe, said Dmitry Chernavski, is just a consequence of the countries with different levels of life and mentality integrating into European Union. “After the clearance of liquid asset the peripheral countries in Europe can no longer offer competitive products to the world market, thus reducing the trade deficit, they cannot create jobs and stabilize the budget”, – says Dmitry Chernavski.
Via EPR Network
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