EU Crafts $928 Billion Loan Package in Attempt to Halt Euro Decline
May 10th, 2010Via: Bloomberg:
European finance ministers put together an unprecedented loan package that may be worth 720 billion euros ($928 billion) for debt-swamped governments in a bid to restore faith in the euro and prevent Greece’s fiscal woes from unleashing a global crisis.
Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, the 16 euro governments pledged to make 440 billion euros available, with 60 billion euros more from the EU’s budget, said Spanish Economy Minister Elena Salgado at a press conference in Brussels today. The International Monetary Fund may provide a further 220 billion euros, she said.
“We are placing considerable sums in the interests of stability in Europe,” Salgado told reporters in Brussels after chairing the 14-hour meeting.
Under pressure from the U.S. and Asia to stabilize markets, the European governments gambled that the show of financial force would prevent a sovereign-debt crisis and muffle speculation that the 11-year-old euro might break apart.
The European Central Bank will announce “intervention” in financial markets, Luxembourg Finance Minister Luc Frieden told reporters, without giving further details.
Europe’s failure to contain Greece’s fiscal crisis triggered a 4.1 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.’s collapse. It prompted President Barack Obama to call German Chancellor Angela Merkel and French President Nicolas Sarkozy yesterday to urge “resolute steps” in Europe to prevent the crisis from cascading around the world.
