The European Stability Mechanism (ESM) will have a full lending capacity of
500bn euros (£400bn; $650bn) by 2014. It will initially run alongside, and then eventually replace, the European
Financial Stability Facility (EFSF). Europe's largest economy, Germany, will make the biggest contribution to the
fund, about 27% of its total. The ESM, which is a new European Union agency, will be chaired by Jean-Claude
Juncker, the Prime Minister of Luxembourg and chair of the Eurogroup. The launch of the ESM "marks an historic milestone in shaping the future of
monetary union", Mr Juncker said after the inaugural meeting of the Eurogroup of
finance ministers that makes up the fund's board.
Countries will make their first payments towards the fund this week. Earlier, the EU economic and monetary affairs commissioner, Olli Rehn, said:
"It provides the eurozone with a robust and permanent firewall and it provides
us with a strong toolbox of effective and flexible instruments. "Thinking of where we were two-and-a-half years ago when we had no
instruments of crisis management, we had to create the Greek loan facility and
the temporary European facility, we are moving forward and we are supplementing
the economic and monetary union with one important building block," he said as
he arrived at the meeting.
"Nobody is in party mood, but I am less pessimistic for the moment for the
eurozone than in the spring."
8 comments:
No one with a grain of sense, who can afford it, should resist the temptation to take their euro out and change them into hard currency like the US$.
It is downright foolhardy to hold euro in these days.
It is also reckless to keep your money, except enough for say 3 months expenses in ANY Eurozone bank.
Our neighbours here in Belgium switch euro into dollars every month. Very wise. But their account is in a French bank based in Belgium.
Now how daft can one get?
When the euro goes or Germany leaves the euro - all our banks here in fantasy land (the EZ) will just close their doors - perhaps for weeks.
Mircea Halaciuga,Esq.
S&P warned that rising unemployment and harsh austerity measures are likely to intensify social unrest and cause further friction between Spain's central and regional governments.
"The downgrade reflects our view of mounting risks to Spain's public finances, due to rising economic and political pressures," said the rating agency in a statement.
"In our view, the capacity of Spain's political institutions (both domestic and multilateral) to deal with the severe challenges posed by the current economic and financial crisis is declining, and therefore, in accordance with our rating methodology (see "Sovereign Government Rating Methodology And Assumptions," published June 30, 2011), we have lowered the rating by two notches."
The downgrade to BBB- from BBB+ late on Wednesday leaves Spain one notch above "junk" status. S&P also attached a "negative outlook", which warns of a possible downgrade in the medium term.
S&P said it would downgrade the country's debt status further if political support for Madrid's reform agenda weakens, if eurozone support fails to prevent Spain's borrowing costs hit unsustainable levels or if debt tops 100pc of economic output or debt payments surpass 10pc of general government revenues.
Not sure what the EU has ever done for Spain, if they had been independent countries and had their own currency it would have never been allowed to go this far with the spending and debt.
The Euro is a strangling corset!
Without it the Peseta would have gone pop a few times......somewhere 35% below the surface. It's inherent fragility would have 'auto conditioned' stupid spending/risk.
The Portuguese escudo would have gone some 55% below......but the country has a Trojan insider called Barroso, in Brussels and nobody yet wants to say f... off! to him and the system. Porra!!! Even the Pope cannot now arrive and wave his arms to forgive our taxation transgressions.......Brussels forbids his blessings.
I have worked and lived/paid tax in both countries. With the Euro, I want to leave, but the corset is too tight. Breathing is getting difficult, and will probably be taxed next.
A major earthquake and tsunami is both due and required!
From hero to zero in 5 short years, the huge wealth the Spaniards along with the Irish, Portuguese, Greeks ect thought they had was a cruel credit fuelled illusion.
Brown did precisely the same in Britain but luckily we have the pound and an independent central bank otherwise we would be there now and maybe we will be in a couple of years too.
Whatever you do do not trust social democratic ideologues to run economies whether nationally or supranationally, they always destroy our wealth.
The data could not be clearer..
Austerity is driving Spain into depression - wages are falling rapidly, unemployment is still rising, GDP is falling rapidly again, whilst public debt is ballooning.
Even if (and it's a very big IF..) the austerity drive solves the public financial problems; the Spanish people will still be left with much lower incomes, and much reduced ability to pay their everyday bills, let alone service their debts.
With incomes (in real terms) down 10% in a year, and house prices falling by 15% YoY, Spain's already stricken banks must be facing a massive upsurge in consumer debt default.
(- and don't forget that Spanish banks already have vast amounts of real estate on their books that is ludicrously over-valued on their balance sheets..)
The Spanish problems are too big for the other EZ members to shoulder, and the rational solution to the Spanish problem (printing their debts to oblivion) would be intolerable to the Germans.
Either Spain leaves the eurozone - or the eurozone breaks up..
Ratings agency Standard & Poor's has downgraded Spain's credit rating, highlighting a deepening recession and mounting pressure on Madrid's finances.
S&P cut Spanish debt from BBB+ to BBB-, one level above junk status, and warned of possible further downgrades.
Spain is struggling with high debt levels and the highest rate of unemployment in the eurozone.
Madrid has introduced drastic spending cuts and tax rises, but many think it will have no option but seek a bailout.
"The downgrade reflects our view of mounting risk to Spain's public finances, due to rising economic and political pressures," S&P said.
"The deepening economic recession is limiting the Spanish government's policy options."
Democracy in the EU is dead and gone. The EU is now run by a band of totalitarian communist hooligans who have no respect for either sovereignty or democracy. They are worse than the Chinese leadership who at least have some concern for their poor destitute workers. This will end in a massive uprising, much bloodshed and the European dream of peace in our time, left in tatters!..
The high youth unemployment and austerity measures in Southern Europe are creating a very dangerous environment and it can only be a matter of time before civil unrest gets out of control.
why are we accepting the system that enslaves us saving itself at our expense?
let the banks fall...wipe out all virtual debts...arrest the people who are trying to keep this corrupt system alive and start again...with a new system NOT based on a small group of people being able to make money out of thin air and charging us interest on it so we can use it..
THATS a crime...obviously...its corruption and a con of the highest order...so arrest them!!!..There seems to be an accepted view that the juggernaut of globalisation cannot be stopped or reversed. Globalisation was an accepted view in the 1920’s, until the bust. Globalisation was stopped in its tracks and the opposite took its place, Nationalism.
The imposition of austerity measures in the West is demonstrating to the vast majority that globalisation has done them no favours at all. Nationalism will probably first raise its head in the club med countries and this will be the beginning of the end for the latest globalisation phase.
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