While bond investors still appear unconvinced that the politicians have a clear strategy to restore the euro’s fortunes, there is growing political division over the best solution.
Belgium, which holds the EU presidency, and which has seen its own bond yields increase, wants the €750bn fund increased.
Luxembourg and Italy have thrown down the gauntlet calling for the creation of euro bonds and there appears to be tacit support from the European Commission.
But both ideas have been scotched by Germany, and at last night’s eurogroup news conference, Luxembourg’s Prime Minister appeared to accept that the focus should remain on countries reining in their deficits.
And, in the Irish Times, Arthur Beesley identifies “the epic muddle” the EU leaders are in
A multitude of interests are at play – within member states themselves, the banks they support and the EU institutions – and the very scale of the core problem grows larger as Belgium and Italy feel the heat of crisis.
The current vogue vests hope in markets placing their faith in the multipronged “systemic” response. However national austerity programmes and ad-hoc schemes to prop up banks and member states and a stricter economic rulebook have yet to do the deed.
Investors still fear defaults because they believe the weakened euro countries to be too indebted and they distrust wealthier countries to carry the can for them. On both these fronts, the political and financial implications are huge. As a result, Europe’s leaders are struggling to develop a coherent response.
Frau Bundeskanzerlin, history’s knocking…
Adds From a BBC report
On Monday, the head of the International Monetary Fund, Dominique Strauss-Kahn, had called for an increase in the size of funds available for support.
And on Tuesday, he criticised Europe’s response to the eurozone debt crisis.
Speaking from Athens, where he was attending a meeting with the Greek prime minister, Mr Strauss-Kahn said: “The eurozone has to provide a comprehensive solution to this problem. The piecemeal approach is not a good one.”