You are hereEU Leaders Embrace Massive Bailout
EU Leaders Embrace Massive Bailout
European leaders have approved a new, permanent $661 billion bailout fund to help rescue the continent's debt-ridden countries, but are still faced with resolving other difficult economic issues at their first 2012 summit.
The heads of state met in Brussels Monday and witnessed an immediate reminder of the continent's financial woes. Belgian workers staged their first general strike since 2005 to protest the austerity measures imposed in their country. Some flights were canceled into and out of the country, with public ground transportation services brought to a standstill.
The new bailout fund will take effect in July, a year earlier than originally planned, and is set to eventually replace a smaller, temporary rescue fund. Three of the 17 countries that use the euro currency - Greece, Ireland and Portugal - have already been forced to secure international bailouts, with Greece now seeking approval for a second aid package.
The precarious state of Greek finances is at the forefront of the EU summit. Germany, Europe's economic powerhouse, has proposed that a European Union commissioner be named to oversee spending by the Athens government, an idea denounced by Greece.
The European leaders are still debating a plan to impose stricter spending controls on individual countries throughout the continent, and at the same time begin to boost the stalled European economy. Economic analysts say the continent could slide into a moderate recession in the first half of the year.
Despite extended negotiations with its private creditors, the Athens government has so far been unable to complete an agreement to cut in half the amount of money it owes them. That could reduce the Greek debt by $130 billion, but talks on the pact have snagged on the interest rate Greece would pay on the revised debt.
The German call for a commissioner to oversee Greek spending was met with mixed reviews.
Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of finance ministers from the 17-nation bloc that uses the euro currency, said the idea was "not acceptable."
"I don't think that this German proposal idea should only be dedicated to Greece, if this is a general rule, if by a general rule we are saying that if a country is not doing what it is committed to, then this could be an idea, but I am strongly against the idea of imposing a commissioner with that mission only to Greece, it is not acceptable, neither for Greece nor for me,'' said Juncker.
Swedish Prime Minister Fredrik Reinfeldt said European leaders are frustrated that Greece's debt woes have yet to be resolved and that Athens has not kept its promises to cut spending.
"They are not delivering on their own promises when it comes to reforms and of course you can see an increase of frustration over this and therefore there is this discussion how to monitor this more closely and on the place, which is now spelled out by the Germans, I can understand that,'' he said.
German Chancellor Angela Merkel sought to downplay the dispute over outside control of Greek spending. As she arrived in Brussels, she said her goal is to help Greece solve its problems.
"It is about how Europe can support Greece so that they can keep within the things that they were given as parameters, and that can only be done if Greece and the other countries discuss this together, and that is why I don't want a controversial discussion, but a successful one,'' said Merkel.
But even as Greece seeks approval of a new $169-billion bailout, its second in two years, new worries have emerged that Portugal might also need its second international aid package. Financial underwriters on Monday boosted the cost of insurance on Lisbon's bonds and required that they be paid up front, terms second only to those affecting Greece.