Euro-zone ministers to launch ESM rescue fund
Greek and Spanish cases put on hold as bailout uncertainty persists
Agence France-Presse in Brussels
The euro zone finally gets its €500 billion (HK$5 trillion) rescue fund today when finance ministers meet amid growing uncertainty over Greece's tortuous debt bailout and whether Spain will need help in turn.
The formal launch and inaugural board meeting of the European Stability Mechanism (ESM) comes just 10 days before the EU's 27 leaders hold a Brussels summit, with expectations low that there will be any breakthrough on the big issues.
Greece will not get the green light, either in Luxembourg or at the October 18-19 meeting, for the resumption of its drip-feed bailout after differences with its European Union, European Central Bank (ECB) and International Monetary Fund (IMF) creditors.
EU, IMF and ECB officials have been locked in discussions with Athens over the need for more austerity measures while Greece insists it has done as much as it can and now needs more time to meet the troika's targets.
Greek Prime Minister Antonis Samaras said on Friday that the country could not take more austerity and if its next aid tranche worth €31.5 billion did not arrive soon, then by November state coffers would be empty.
The October summit comes "considerably too early" to resolve the issues, a senior euro-zone official said, given competing demands from the IMF, a newly-public alliance of euro-zone hardliners Germany, the Netherlands and Finland, and Greek leaders from opposite ends of the political spectrum.
Germany, the Netherlands and Finland appeared to put in doubt key commitments made at a June summit, which notably agreed that the ESM would be able to recapitalise banks directly once a single banking supervisor is put in place, hopefully by the end of the year.
The three argued that the ESM should not be used to help those banks already bailed out before it became operational.
This is a potentially heavy blow for the likes of Ireland, which went bust after trying to keep its lenders afloat, and for Spain, which has also recapitalised some of its banks and secured €100 billion from its euro-zone partners to do more.
Another EU official said this stand on "legacy assets" must have been "very unwelcome" for Spain and bailed-out Ireland.
In the build-up to the euro-zone and EU finance ministers' meeting in Luxembourg today and tomorrow, much attention has been on Spain and whether or not it would ask for a bailout, activating the ESM and bringing the ECB into play on the government bond markets.
Spanish Economy Minister Luis de Guindos said on Thursday that Madrid did "not need a bailout at all" and insisted that the government's tough austerity policies were putting the country on the right track.
Thousands of Spaniards marched in cities across the country yesterday to decry the tough austerity measures, part of a growing protest movement that shows no signs of abating and could culminate in a general strike next month.
Spanish labour unions said they would call a general strike if the government did not hold a referendum on unpopular spending cuts. Prime Minister Mariano Rajoy unveiled €13 billion in additional savings in a tough budget last month.