THE EUROZONE’S 17 finance ministers agreed yesterday that poorer EU states will have to pay slightly lower contributions into the EU’s future bailout fund. In the future, any countries that receive aid from the new fund will pay interest rates that are, on average, 1 percentage point lower than rates in the current bailout fund.
However, Ireland has to wait for a decision on the interest rate it has to pay for the €67.5 billion rescue loan it received last November. German Finance Minister Wolfgang Schaeuble said Ireland was not discussed and he was still waiting to hear what the country had to offer in return for a better interest deal.
For now, it has been agreed that nations that use the euro currency will give the new European Stability Mechanism a capital base of €80 billion and provide €620 billion in callable capital and guarantees, said Olli Rehn, the European Union monetary affairs commissioner.
The ESM will start in mid-2013, succeeding the eurozone’s existing bailout fund, the European Financial Stability Facility. European policymakers hope the existence of a rescue mechanism for countries that run into financial trouble after 2013 will help counter any doubts over the credibility of the euro.
Investors were keen to know the details of the future fund amid doubts that Europe will have solved its debt crisis — which has already pushed Ireland and Greece into multibillion-euro (dollar) bailouts — by 2013.
The €80 billion capital base allows the fund to act more like a bank, giving additional security to its creditors. The callable capital and guarantees would only have to be paid if a bailed-out country fails to repay its loans.
Ministers also decided to tweak the formula to calculate each state’s contributions, giving economic output more weight than population and thus slightly lowering the burden on poorer countries. That follows demands by 10 poorer eurozone states, including Slovakia and Malta, which felt they were carrying an unfair burden compared to their economic strength.
Schaeuble, who until earlier in the day had opposed changes to the formula, said the tweaks were so minimal — changing his country’s contribution by less than 0.1 per cent — that all finance ministers were able to agree.
On top of that, countries that receive aid from the new fund will pay interest rates that are, on average, 1 percentage point lower than rates in the current bailout fund.
The final decisions on the new fund will come at a summit of EU leaders Thursday and Friday.
-Additional reporting, AP.
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