Europe unveils 750-billion-euro crisis fund
Tuesday, 11 May 2010
BRUSSELS, May 10 (AFP): Crisis-hit Europe today announced a monster rescue package running to 750 billion euros between euro countries and the IMF, sending the euro surging in Asian trade.
Leaders hope an unprecedented international intervention, worth just shy of one trillion dollars, will represent a game- changing European financial war chest, which will also be backed by European Central Bank action to nudge debt and currency markets.
European Union finance ministers agreed, after marathon talks lasting more than 11 hours, that 440 billion euros would come from the troubled eurozone plus another 60 billion euros from the European Commission coffers.
That would be backed by "at least half as much" again from the International Monetary Fund, Spanish finance minister Elena Salgado said, or another 250 billion euros.
The vast rescue package "proves that we shall defend the euro whatever it takes," said the EU's commissioner for economic and monetary affairs, Olli Rehn of what ultimately involved a pan- European cry for help to the IMF.
The battered euro currency immediately surged to 1.2907 dollars in Asian trade, having hit a 14-month low of 1.2523 dollars last week on fears that marbled European debts could hit the world's financial system in the same way the collapse of Lehman Brothers did two years ago.
Tokyo stocks also rose when trading opened just as the deal was being sealed in Brussels, with the European Central Bank subsequently saying it would "conduct interventions in the euro area public and private debt securities markets."
It said these were justified by "exceptional circumstances," and further announced that central banks in Britain, Canada, Switzerland and the United States will intervene to ensure that dollar shortages do not occur in European markets.
"In response to the re-emergence of strains in US dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary US dollar liquidity swap facilities," the ECB said.
These moves taken together could represent action that traders and analysts refer to as a "nuclear" option, agreeing to buy euro countries' bonds or accepting toxic eurozone government debt as collateral.
Leaders hope an unprecedented international intervention, worth just shy of one trillion dollars, will represent a game- changing European financial war chest, which will also be backed by European Central Bank action to nudge debt and currency markets.
European Union finance ministers agreed, after marathon talks lasting more than 11 hours, that 440 billion euros would come from the troubled eurozone plus another 60 billion euros from the European Commission coffers.
That would be backed by "at least half as much" again from the International Monetary Fund, Spanish finance minister Elena Salgado said, or another 250 billion euros.
The vast rescue package "proves that we shall defend the euro whatever it takes," said the EU's commissioner for economic and monetary affairs, Olli Rehn of what ultimately involved a pan- European cry for help to the IMF.
The battered euro currency immediately surged to 1.2907 dollars in Asian trade, having hit a 14-month low of 1.2523 dollars last week on fears that marbled European debts could hit the world's financial system in the same way the collapse of Lehman Brothers did two years ago.
Tokyo stocks also rose when trading opened just as the deal was being sealed in Brussels, with the European Central Bank subsequently saying it would "conduct interventions in the euro area public and private debt securities markets."
It said these were justified by "exceptional circumstances," and further announced that central banks in Britain, Canada, Switzerland and the United States will intervene to ensure that dollar shortages do not occur in European markets.
"In response to the re-emergence of strains in US dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary US dollar liquidity swap facilities," the ECB said.
These moves taken together could represent action that traders and analysts refer to as a "nuclear" option, agreeing to buy euro countries' bonds or accepting toxic eurozone government debt as collateral.