Juncker Says Permanent Aid Mechanism Necessary for EU
The ongoing Greek debt crisis has prompted European finance ministers to consider creating a permanent mechanism to deal with economic crises in the Euro Zone. Luxembourg Prime Minister Jean-Claude Juncker addressed a news conference in Madrid and stated, “We’ve reached an agreement that we need to set up a permanent crisis (resolution) mechanism.” The European Commission and the European Union executive plan to announce the proposals on May 12th. The recent drive to establish an aid mechanism for Greece prompted EU leaders to consider creating a permanent mechanism to deal with similar crises in other EU nations. The Athens government is seeking clarification on how the loan mechanism would work. Greek Prime Minister George Papandreou told parliament that any request for aid would be made in the nation’s best interest. Papandreou stated, “We are taking all the preparatory actions required.” The Athens government has already implemented several austerity measures including wage and pension cuts, tax hikes and greatly reduced spending. The European Commission, European Central Bank and the IMF will meet with Greek officials on Monday to discuss the details of what will be the first bailout of an EU member nation. European Economic and Monetary Affairs Commissioner Olli Rehn stated, “It is a matter of preparing a joint program of conditionality and financing if needed and if requested.”
Greece Asks For EU/IMF Talks
In a letter released to the media on Thursday the Athens government said it was asking for talks with EU officials and the IMF. Many analysts believe this is the first step in asking for outside aid. Luxembourg Prime Minister Jean-Claude Juncker said that at the present time Greece has not asked for activation of the loan mechanism. Borrowing costs have made it difficult for Greece to re finance its debt. The spread between Greek and German bonds widened to 440 basis points. A recent poll showed that a majority of Greeks support Prime Minister Papandreou but remain unhappy about tax increases and pay freezes. Two thirds of Greeks support the current government over the conservative opposition and Papandreou’s support is at 68%.
Establishment of European Monetary Fund Proposed
German Finance Minister Wolfgang Schaeuble said in a newspaper interview that he planned to introduce proposals on the establishment of a European monetary fund to ensure EU economic stability. EU Commissioner Rehn proposed that policy coordination improvements should include EU reviews of member states draft budgets before they are approved by national parliaments. ECB Governing Council member Mario Draghi said that proposals for changes in EU rules are in the embryonic stage. Draghi stated, “There is still a great lack of detail and we are still at an extremely early stage. It’s still under discussion and no one has a clear idea.”
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