Euro zone finance ministers and officials Highlights

Tuesday, November 29, 2011

Euro zone finance ministers and officials met in Brussels on Tuesday to agree on leveraging their EFSF bailout fund so it can help Italy or Spain should they need aid.

They also agreed to release the next aid payments to Greece and Ireland under their assistance programmes.

Following are highlights of comments after the talks:

EU ECONOMIC AND MONETARY AFFAIRS COMMISSIONER OLLI REHN

ON SITUATION IN ITALY:

"There is a certain need of taking further measures on fiscal consolidation to meet the path of fiscal adjustment towards a balanced budget in 2013, to which Prime Minister (Mario) Monti and his government have been fully committed.

"We are currently assessing the specifics of this in terms of the impact of a somewhat weaker growth outlook on fiscal policy. And I know that the government is currently assessing the needs and likely measures in order to meet this fiscal gap, and we work in partnership with the government in order to support it meeting this objective.

"I expect that the Italian government will indeed meet its objective and stick to its commitment of achieving a balanced budget in 2013 and stay on the path towards that objective next year, in 2012."

ON INCREASED IMF RESOURCES:

"The EU, and all the EU member states together at the G20 summit in Cannes, we supported ... an agreement on an increase in IMF resources, either through bilateral loans or through new SDR allocations.

"This is still pending and I just want to underline that the European Union and the Commission is supportive of increasing the resources of the IMF, and we see pretty much eye-to-eye with Managing Director Christine Lagarde in this regard."

ON HOW THE IMF PLAN WOULD WORK AND WHO WOULD PAY IN:

"That is something that of course needs to be discussed with the IMF and this work is in progress. We are, together with the IMF consulting potential contributors. But among the euro member states there is very important support to increase IMF resources."

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EUROGROUP PRESIDENT JEAN-CLAUDE JUNCKER

ON SITUATION IN GREECE:

"I think of Greece day and night... I have no particular concern about Italy and Spain but everyone knows what needs to be done to ensure financial stability. I can hardly speak on behalf of the European Central Bank, which is very sensitive when people encroach too much on its independence..."

ON SITUATION IN ITALY:

"We were discussing the situation in Italy in the presence of the newly appointed prime minister, Mario Monti. He presented us the policy priorities of the new Italian government.

"We recognise that recent progress including the anticipation of the balanced budget to 2013 from 2014, the approval of two packages that will include the primary balance rising 3.5 percent of GDP by 2014, and the tabling of a constitutional amendment proposal to introduce a balance budget rule by mid-2012 represents a good basis to build on for an ambitious reform programme that is needed to secure the announced deficit targets and boost economic growth."

"We have full confidence that Mario Monti will be able to deliver this programme.

ON NEXT AID PAYMENT TO GREECE:

"The disbursement will take place once the IMF executive board has taken its decision in the beginning of December. Funds will be made available by mid-December.

"We reviewed the progress of the PSI (private sector involvement) operation. We called upon the Greek authorities and the representatives of its creditors to speed up negotiations to find an agreement in January ensuring the highest participation rate, while respecting the key parameters of the European summit of Oct. 26/27."

ON EXPANDING EFSF AND IMF RESOURCES:

"We continue to explore further options to leverage the EFSF in light of market developments and investors' interest.

"We also agreed to rapidly explore an increase of the resources of the IMF through bilateral loans, following the mandate from the G20 Cannes summit, so that the IMF could adequately match the new firepower of the EFSF and cooperate even more closely."

EUROPEAN FINANCIAL STABILITY FACILITY HEAD KLAUS REGLING

ON SIZE OF LEVERAGED EFSF:

"It is really not possible to give one number for leveraging because it is a process. We will not give out a hundred billion next month, we will need money as we go along.

"If some member states ask for assistance, they will have to make a request, so all this is unpredictable and market conditions vary over time."

ON INVESTMENT IN EFSF:

"It should be clear that we do not expect investors to commit large amounts of money in the next few days or weeks. Leverage is a process over time. We only need to mobilise resources if and when we need to support a member state and when we use our new instruments.

"But the EFSF is now ready to implement both approaches. We will use both options simultaneously. The final amount of firepower will depend upon the concrete use and mix of instruments and the exact degree of protection, somewhere between 20 and 30 percent.

"The deployment of either instrument using leverage will only be made following a request from a member state, and any support from the EFSF will be linked to strict policy conditionality, monitoring and surveillance procedures."

Following are highlights of comments from before the talks:

SPANISH ECONOMY MINISTER ELENA SALGADO

ASKED ABOUT A TWO-SPEED EURO ZONE:

"No, I don't agree with that. All we can do to work together is important to solve this crisis, we all contribute to the EFSF and those that can, we all help Greece."

ON EFSF LEVERAGING:

"We shouldn't talk about a maximum capacity, because markets would bet against that, I think we should look to raise its power as much as we can."

GERMAN FINANCE MINISTER WOLFGANG SCHAEUBLE

ON LEVERAGING OF THE EFSF:

"It depends to a degree on how the markets develop and on which methods would be used to achieve such a leveraging."

ON BONDHOLDER LOSSES, GREECE AND INCLUDING PROVISIONS FOR PRIVATE SECTOR INVOLVEMENT IN THE PERMANENT EUROPEAN STABILITY MECHANISM:

"We are all agreed... That for the length of the EFSF, where we do not plan private sector participation, Greece remains a one-off. That cannot be called into question."

"When have a permanent stability mechanism as an international financial institution, the ESM, as soon as possible and if we then want to implement the provision, as we have agreed, that all European bonds have Collective Action Clauses, then it is of course the case, that what is in the ESM draft contract must stay as it is."

DUTCH FINANCE MINISTER JAN KEES DE JAGER

ON ROLE OF IMF IN BAILOUT FUND:

"We will have to look at the IMF, 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. Then you have more money but it's still not enough."

"It could be through a general increase in resources -- of the SDRs -- it could be through new arrangements to borrow so bilateral loans and it should come from both Europe and non-European countries.

"Obviously, for a lot of countries, increasing the size of the EFSF is not an option now. The Netherlands does not block that option but several countries do not have the possibility to increase much more its capacity."
ON EFSF LEVERAGE:

"We have talked about leverage though private money, but it would be two or two and a half times an increase so not sufficient and we have to look for other solutions to complement the EFSF and that in my mind will be the IMF."

ON DISCUSSIONS WITH LIKE-MINDED EURO ZONE MEMBERS:

"I met with my German and Finnish colleagues on Friday to prepare a common view on this crisis. We envisage a larger role for the IMF, but also it's very important that we address long-term governance as well as conditionality.

"Only putting more money on the table will not solve the fundamentals of this crisis. We will have to do more reforms and more austerity, especially in southern Europe."

BELGIAN FINANCE MINISTER DIDIER REYNDERS

ASKED ABOUT POSSIBILITY OF ECB LENDING TO THE IMF:

"We will discuss with the ECB. The ECB is an independent institution, so we will put on the table some proposals and after that it is for the ECB to take the decision."

ON EU-WIDE DECISIONS:

"There are two solutions (to the crisis), my preference is for a solution among the 27 but you cannot block those who share the same currency. If we cannot get a solution at 27, the euro zone must also be able to defend its currency."

LUXEMBOURG'S FINANCE MINISTER LUC FRIEDEN

ON EURO ZONE STABILITY:

"We need stability and confidence. We need to help Greece, maybe other states too. This has to be connected to strong conditions and if those are not respected we need to impose sanctions up to excluding a member state. That's not our goal but if that is necessary it has to happen.

"We need stability in the euro zone, that's why we need to work with the IMF, the ECB and with a strengthened EFSF and intervene where it is necessary."

ON LEVERAGING THE EUROPEAN FINANCIAL STABILITY FACILITY (EFSF) BAILOUT FUND:

"I think it will be very difficult to reach, in view of the changed market circumstances, the initially envisaged leverage goal, but we have to listen to the CEO of the EFSF before we can take a decision on this.

"I think the EFSF alone will not be able to solve all the problems, we have to do so together with the IMF and with the ECB, within the framework of its independence."

ON NEXT AID TRANCHE FOR GREECE:

"Based on the written consent by all party heads in Greece the conditions are met to pay the next tranche. But we have to discuss this, and also see what the commission and the ECB have to say about this. But I think the conditions are now met."

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