Slovak Finance Minister:EFSF Increase Won't Solve Debt Problem
BRUSSELS - Increasing the size of the euro zone's rescue fund for financially-troubled countries won't solve the underlying problem of insolvent states and banks, Slovakia's Finance Minister Ivan Miklos said in a statement posted on the ministry's website.
The statement, posted to coincide with a two-day meeting of euro group and European Union finance ministers, said that the very creation of the European Financial Stability Facility was a mistake, and that the increase in its size that some ministers are lobbying for would be another one.
"Unless the private sector-- in particular--is taken on board, the bill will continue to be footed by the taxpayer only," Miklos said, although he acknowledged the risk that forcing banks to absorb losses on their bondholdings could lead to further increases in government borrowing costs, further aggravating the debt crisis.
Euro group finance ministers agreed in principle late Monday that they will provide the European Stability Mechanism, a permanent institution that will replace the EFSF when its mandate expires in mid-2013, with an effective lending capacity of at least EUR500 billion. That sum could be bolstered on a case-by- case basis by the International Monetary Fund and by EU member states that don't use the euro, such the U.K., Sweden and Denmark.
"The question to be answered is relatively simple: Who will foot the bill?" Miklos said.
In addition to repeating his criticism of Greece's lack of control over public and private-sector wages over the last decade, Miklos also singled out German banks as being prominent in lending to Greece to its boom.
Separately, the ministers had also agreed to nominate Belgium's Peter Praet to replace Gertrude Tumpel-Gugerell on the board of the European Central Bank, ahead of Slovakian National Bank board member Elena Kohutikova. The nomination leaves the ECB's governing council without a single female member. Miklos' statement didn't comment on that decision, which euro group chairman Jean-Claude Juncker had said was 'unanimous'.
(Dow Jones)
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