European governments capped fresh rescue lending at 500 billion euros ($666 billion), after a Germany-led coalition opposed a further expansion of the region’s anti-crisis firewall.
Adding the 300 billion euros already committed to Greece, Ireland and Portugal, euro-area finance ministers put the overall size of the firewall at 800 billion euros. In a statement, they ruled out using the 240 billion euros left in the temporary rescue fund to go beyond that.
“This sum is important,” Austrian Finance Minister Maria Fekter told reporters at a meeting of European finance ministers in Copenhagen today. “Considering the involvement of the International Monetary Fund as well as the discussions at the G-20, joint participation depends on what Europe does -- and Europe has now fixed this sum clearly.”
Europe is counting on the sums pledged so far, plus a 1 trillion-euro cash infusion by the European Central Bank into the financial system, to persuade the rest of the world that it is doing enough to keep the two-year-old debt crisis at bay.
As flagged by German Chancellor Angela Merkel, the rich countries endorsed an increase of the overall lending ceiling to 700 billion euros to cover the planned 500 billion-euro permanent European Stability Mechanism plus 200 billion euros committed by the temporary fund to Greece, Ireland and Portugal.
Richer countries refused to go further, tossing out a proposal to make the money left in the temporary fund fully available. Instead, that 240 billion-euro sum will be used only to get the ESM up to its full 500 billion euros during its two-year buildup starting in July.
“That is no longer in there,” Dutch Finance Minister Jan Kees de Jager said. “If the 500 billion euros in fresh capital isn’t available, then we’re willing to guarantee the 240 billion euros.”
European officials wheeled out a variety of numbers -- including bilateral loans to Greece in 2010, loans from a now- defunct centrally managed fund and the ECB’s cash infusion to banks -- to defuse international criticism of Europe’s response to the crisis.
“Robust firewalls have been established,” the ministers’ statement said. “This comprehensive strategy has paid off and led to a significant improvement in market conditions.”
Officials will hold press conferences later today to provide details. The euro meeting’s chairman, Luxembourg Prime Minister Jean-Claude Juncker, cancelled his scheduled briefing after Fekter went public with the news first.