EU economic ministers agree on euro750 billion package to defend currency

ELENA BECATOROS, RAF CASERT Associated Press Writer May 9, 2010 | 6:25 p.m.

BRUSSELS (AP) — European Union finance ministers agreed Monday on a euro750 billion EU and International Monetary Fund safety net for troubled eurozone countries, hoping it will keep markets from targeting the weaker members of the 16 countries that use the embattled euro.

Under the three-year aid plan, the EU Commission will make euro60 billion ($75 billion) available while countries from the 16-nation eurozone would promise bilateral backing for euro440 billion ($570 billion). The IMF would contribute an additional sum of at least half of the EU's total contribution, or euro250 billion, Spanish Finance Minister Elena Salgado said.

"We are placing considerable sums in the interest of stability in Europe," she said after marathon 11-hour talks in an emergency finance ministers' meeting. The talks were called on Friday night after a eurozone summit in Brussels amid concerns that the financial crisis sparked by Greece's runaway debt problems had begun to spread to other financially troubled eurozone countries such as Portugal and Spain.

The EU's monetary affairs commissioner, Olli Rehn, said the agreement "proves that we shall defend the euro whatever it takes."

"We are facing such exceptional circumstances today and the mechanism and the mechanism will stay in place as long as needed to safeguard financial stability," the ministers said in a statement.

Spain and Portugal, which have begun to see the same signs of trouble that Greece had three months, have committed to "take significant additional consolidation measures in 2010 and 2011," the statement said, and the two countries will present them to the EU's finance ministers at their meeting on May 18.

The EU's slow response to the crisis and its failure to keep Greece from reaching the brink of bankruptcy triggered slides in the euro and global stocks last week, and intensified fears the crisis would spread.

Ministers had hoped to have something approved by the time stock markets opened Monday in Asia, but they missed their deadline by a couple of hours.

EU ministers pledge billions in a gamble to save the euro

Emergency bailout fund established for single-currency states amid fears that economic meltdown could spread worldwide

European leaders were forced today into radical action in an attempt to save the euro, agreeing for the first time to erect a safety net worth tens of billions for member states in distress. They also wrangled over a much more ambitious scheme to issue guarantees from eurozone governments to raise hundreds of billions on the markets.

With the prospects for the single currency drowning in a tidal wave of debt and default fears, and even the future of the European Union being questioned, EU finance ministers established a modest "stabilisation mechanism" for distressed member states, aimed at reassuring the markets opening tomorrow.The plan represented the most fundamental rewriting of the single currency regime since its inception 11 years ago, after months of hesitation over what to do about the debt crisis in Greece.

However, as the governments engaged in a high-risk gamble to shore up the currency, it was unclear whether the moves would be enough to see off market pressure on the eurozone's weaker links.

After a special summit of the 16 eurozone government leaders, which ended early yesterday morning, the European commission and the 27 finance ministers of the EU member states hurriedly constructed the stabilisation fund, invoking last-resort emergency clauses in the Lisbon treaty as the legal base.

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Friday, our US Stock markets were completely jittery. An error in order entry pushed the market over edge and stocks went tumbling down, seemingly triggered by Greece. When the error was discovered, the market recovered, but the damage was done. I have been looking at the Greece news all weekend to hear what EU is doing regarding Greece. This move by EU ministers will hopefully soothe the US market on Monday, or we are in for a bad week.