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Eurozone ministers ink deals to combat crisis, rifts remain

11-30-2011 18:54 BJT

BRUSSELS, Nov. 30 (Xinhua) -- Eurozone finance ministers have agreed to expand a rescue fund and also approved aid packages for Greece and Ireland to contain the worsening euro crisis, but lingering differences remain among the bloc's 17 members.

With Italy's soaring borrowing costs and the potentially large bailout, the finance ministers agreed on Tuesday to beef up the European Financial Stability Facility (EFSF) through two approaches.

One is to allow the EFSF fund to guarantee 20 percent to 30 percent of potential losses incurred by investors who buy bonds of governments in financial trouble, and the other is to create a common investment fund to attract foreign investors to buy eurozone government bonds.

But market participants have feared that the fund would not reach the 1-trillion-euro (1.33-trillion-U.S.-dollar) amount that had been previously expected.

"We will have to look at the IMF (International Monetary Fund) which can also make available additional funds for the emergency fund. I think countries in Europe and outside of Europe should be prepared to give more money to the IMF," Dutch Finance Minister Jan Kees de Jager told reporters.

Finance ministers have agreed on bilateral loans to increase the resources of the IMF to "adequately match the new firepower of the EFSF" and "cooperate more closely," Eurogroup Chairman Jean-Claude Juncker said.

The 17 finance ministers late Tuesday also approved the release of an 8-billion-euro (10.6-billion-dollar) aid payment to Greece, averting an imminent bankruptcy of the country, and granted a 4.2-billion-euro (5.6-billion-dollar) bailout loan to Ireland following a positive assessment of the country from international lenders.

The release of the payment to Greece, which is the sixth installment of loans to help its finances, came after a month of delay due to Greece's major political parties' refusal to sign on a written commitment concerning structural reforms to the international lenders.

"The pre-conditions have been met, including the signing of letters of support from the Greek prime minister and from the leaders of the main political parties in Greece," Juncker said after the meeting.

The IMF executive board is expected to take its decisions at the beginning of December, and then the loan will be made available in mid-December, a crucial time for Greece as a large portion of its government debt comes due just at that time, Junker said.

Given the result of international lenders' review of the adjustment program in Ireland, "we commended the Irish authorities for a very strong implementation of reform measures which is expected to bring its fiscal deficit level to 10.5 percent of GDP in 2012," said Juncker.

The review found that the Irish government is committed to putting the debt on a firm downward path by reaching the 3 percent target in 2015,Junker told a press conference.

"All these will allow us to disburse a total of 8.5 billion euros (12.3 billion dollars) of loans to Ireland in January 2012," Junker said. The loans would consists of 4.2 billion euros (5.6 billion dollars) from the EFSF, 3.8 billion euros (5.0 billion dollars) from the IMF, and 500 million euros (664 million dollars) from Britain.

However, the financial ministers were split on the idea of fiscal integrity.

Germany, the bloc's biggest economy, supports changes to Europe's current treaties.

"Our priority is to have the whole of the eurozone to be placed on a stronger treaty basis," German Chancellor Angela Merkel said Tuesday in Berlin. "This is what we have devoted all of our efforts to, this is what I'm concentrating on in all of the talks with my counterparts."

However, the idea received a lukewarm response from many of the eurozone countries.



Editor:Zhang Dan |Source: Xinhua

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