A meeting of eurozone finance ministers ended with no new measures last Friday (16 September), amid pressing calls to quickly finalise the second aid package to Greece and ratify reforms of the eurozone’s €440 billion bailout fund. “Everyone is disoriented,” summed up a dismayed Jean-Claude Juncker, Eurogroup chairman.
Ministers and central bank governors from the 17 countries using the euro and the broader 27-nation European Union met on Friday and Saturday in the Polish city of Wroclaw to discuss Europe’s slowing economic growth and progress in beefing up eurozone defences against the sovereign debt crisis.
In an unprecedented visit to the informal talks of top EU financial officials, US Treasury Secretary Timothy Geithner made an appearance in Wroclaw on Friday to urge Germany to provide more fiscal stimulus to the slackening euro zone.
He also called on Europeans to strengthen the eurozone’s bailout fund, the €440 billion European Financial Stability Facility (EFSF).
EFSF reform to be ratified by mid-October
Eurozone officials rejected Geithner’s calls, saying their top priority was to implement the 21 July agreement by euro zone heads of states to enhance the EFSF’s capacity, giving it new powers to intervene on bond markets, give precautionary credit to governments and recapitalise banks.
“Fiscal consolidation remains a top priority for the euro area,” said Luxembourg’s Jean-Claude Juncker, chairman of euro zone finance ministers.
But the changes still have to be ratified by euro zone countries, with only four national parliaments having approved the changes – Spain, France, Belgium and Luxembourg. A crucial vote in the German Bundestag is expected on 29 September.
The new powers should be in place by mid-October, said the head of the EFSF, Klaus Regling.
Greece aid on hold
Another aspect of the 21 July agreement, which still needs implementing, is the second aid package to Athens.
Eurozone leaders promised Greece on July 21 a new emergency loan package worth €109 billion. But the payout of the money depends on finding a solution for Finland’s demands to get collateral from Greece for more loan guarantees from Helsinki.
“A technical solution is within reach,” French Finance Minister François Baroin told reporters. Eurozone sources said however, that a deal is likely only in early October because of its complexity.
‘Everyone is disoriented’
The European Commission had made a resolution of Finland’s request for collateral guarantees its top priority for the meeting. But it had to admit more time would be needed to resolve the issue.
Eurogroup Chief Jean-Claude Juncker appeared somewhat confused after the meeting. “In the euro area, everyone is disoriented,” said Juncker at the press conference, cracking a joke for the audience after he had mistaken two upcoming deadlines in the Greek debt crisis.
“I hope you don’t mean the Commission would be disoriented, that would be impossible by definition,” Rehn said as he attempted to entertain the audience of journalists attending the press conference.
“The Commission is not disoriented but the Commission is sometimes disorienting,” Juncker continued amid laughter, suggesting the Commission might have lacked coherence in its response to the debt crisis.
Rehn retorted saying he was “trying to navigate in the sea of 17 euro area member states,” in an apparent reference to the cacophony of diverging national voices that have fuelled market uncertainty and worsened the eurozone debt crisis.