BRUSSELS: Eurozone finance ministers meet Monday under pressure to push ahead quickly with measures agreed last month to tackle the debt crisis as market sentiment turns increasingly negative.
European leaders hailed a June 28-29 EU summit as a breakthrough, promising fresh capital for Spain’s struggling banks, a European bank union to keep the lenders in line and making it easier for the bloc’s new bailout fund to help states in trouble.
But after an initially euphoric response, investors switched tack, pushing Spanish long-term borrowing costs back up to dangerously high levels of around 7.0 percent, the kind of rate which forced Greece, Ireland, Portugal into massive EU-IMF bailout deals.
Responding to the turn of events, Spanish Prime Minister Mariano Rajoy announced Saturday that Madrid would take additional steps soon to cut its public deficit and called for progress on the summit measures.
“What will really determine their success is that they turn into concrete realities, in a supple, quick and effective way,” Rajoy said, adding: “Europe must fulfill the accords as swiftly as possible.”
French Finance Minister Pierre Moscovici said Monday’s meeting will “translate into action” the summit decisions but added that there would be another gathering “in July, on July 20 I think.”
Moscovici, who met Italian Prime Minister Mario Monti Sunday, said “one has to go further” to help the Spanish banks and “move quickly” on tighter banking regulations to speed up bailouts to struggling lenders.
German Finance Minister Wolfgang Schaeuble played down the prospects that Spain would get help for its banks anytime soon, insisting on the quid pro quo of tighter overall regulation first.
“Before direct aid is given to the banks, there must be a common banking supervisor,” El Pais quoted Schaeuble as saying. “But this body will not start functioning this year. That is not very realistic,” he added.
In turn, Italy’s Monti, in an apparent reference to Finland and the Netherlands, on Sunday attacked unnamed “northern” EU states for undermining eurozone “credibility” by challenging the positive view of the summit conclusions.
He said he wanted the finance ministers to implement the decisions “rapidly in operational terms.”
Monti, among others, had described the “breakthrough” accords as coming only after Germany had made significant concessions, a view Chancellor Angela Merkel has consistently rejected.
Greece meanwhile wants more time to implement the obligation linked to its latest debt bailout, saying that while it accepts the tough terms, it needs some slack so as to ease the pressure on an economy stuck deep in recession for a fifth year.
In Brussels, an EU official said Greece would not get its next aid tranche “until the Eurogroup (of finance ministers) has determined that the programme is back on track,” with no decision likely until August.
Monday’s meeting will be “a first exchange of views on what the intentions of the Greek government are,” the official said.
The new Greek government comfortably won a confidence vote late Sunday, which removed one source of uncertainty.
As the positive gloss on the June 28-29 summit wears thin, International Monetary Fund chief Christine Lagarde warned Friday that the global economy is slowing because Europe is not doing enough to fix the debt crisis.
The summit was progress, she said, but “from the IMF perspective … more needs to be done in order to really complete the architectural job of the eurozone — a monetary union, a banking union followed by a fiscal union.
“It’s also a question of implementation — diligent, rigorous, steady implementation,” Lagarde added.
Monday’s meeting may also discuss who should succeed Luxembourg’s Jean-Claude Juncker, who is due to step down on July 17, as head of the eurozone finance ministers group.
Moscovici said France wanted Juncker to stay on, until a “possibly more lasting solution” can be found to the debt crisis.
“I don’t know where this rumour came from, but for now it is not on the cards,” Moscovici said, adding that the Eurogroup was set to make a number of appointments on Monday including a successor to Juncker.