November 8, 2011Europe Tries to Rescue Its Rescue
Brussels, Short on options and shorter on time, euro-zone finance ministers sought at a meeting here Monday to revitalize their sagging plans for a big bailout fund, even as the bloc's debt crisis reached new levels of panic in Italy.
Ministers laid out two options for the fund Monday, and said they would present them soon to possible investors. They said talks on another option—to use the International Monetary Fund to provide greater assistance—were continuing, but gave little indication of progress.
The euro zone's most pressing task is to assemble a bailout fund with sufficient capacity to forestall a potentially lethal cutoff of market financing to Italy, whose government-bond yields are climbing rapidly—reflecting hesitance by investors to lend to a country with nearly €2 trillion ($2.77 trillion) in debt.
At a European Union summit late last month, EU leaders announced they intended to use leverage and insurance schemes to boost the capacity of the bailout fund, known as the European Financial Stability Facility, or EFSF, in part by using investments from non-euro-zone countries. Several top figures said the new fund's capacity could reach €1 trillion.
But at last week's summit of the Group of 20 industrial and developing nations, European leaders got little if any expression of firm interest from large, cash-rich developing nations like China. The U.S. objected to some of the methods that involved the IMF, and Germany has shot down an idea to pool some of the euro-zone central banks' foreign reserves for rescue purposes.
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