Eurozone ministers will pressure Ireland to accept financial aid
- Dublin is reluctant to request a financial bailout.
- The EU wants to stop the debt crisis in Portugal and Ireland so that they do not contaminate Spain and Italy.
- Spain must take more measures if it wants to get away from the eye of the huration, they say from Brussels.
- The last attempt to agree European budgets fails.
Eurozone finance ministers will press Ireland to accept financial aid from the EU's € 750bn rescue fund with the aim of curbing the spread of its debt crisis to other eurozone countries, especially the eurozone. Spain and Italy.
European officials see rescue of Ireland and Portugal practically inevitable Although the Dublin government is reluctant to ask for the fund to be activated, European officials see the rescue of Ireland – and Portugal – which could be carried out at the same time – almost inevitable. and believe that Spain must adopt new adjustment measures if it wants to "get away from the eye hurricane," as reported by a senior European official.
Responsible for the European Commission and the Member States have maintained contacts with the Irish authorities over the weekend on the rescue fund. Dublin refuses to request assistance claiming that it has funding until mid-2011.
"There are those who believe that in this situation it is better to use the mechanism than not to use it, above all because of the situation in the Irish financial system, which has triggered this year's public deficit to 32%," the senior official explained. Dublin has begun the orderly liquidation of the Anglo Irish Bank and the other two big banks in the country – Bank of Ireland and Allied Irish – are also facing serious problems "that go beyond the capacity of the public sector".
Ireland needs to find a solution for the financial system "Ireland needs to find a way out of the financial system, which is there and will not disappear," the sources consulted note. In addition, the Irish government can only solve the financing of the public sector by itself if it finds growth, but with adjustment plans it is unrealistic for the economy to move forward in the next two or three years.
"Meanwhile, the likelihood that Ireland will endure depends on others, particularly the European Central Bank (ECB)," which is providing liquidity to Irish banks.
The Irish problems have infected Portugal to the point that markets "perceive" that the two economies have the same problems despite the differences. This "complicates" the situation even more because "if there is a (rescue) program, it would be two countries . " A joint rescue that would cost 117,000 million to the stability fund of the EU, according to HSBC.
Contagion to Spain
"The next ones on the list, although at a distance, are Italy and Spain, they do not have the same degree of contamination, but every time the Irish fever rises to 39 degrees, that of Spain and Italy rises a little bit," says the senior official. . Thus, in the markets there are already "doubts" about whether Spain will respect the commitment to reduce its deficit to 6% of GDP in 2011 and on "if the hot and cold merger plans (of boxes) are applied with the dose and the right speed. "
The more credible and rapid the measures, the more they will allow Spain to move away from the eye of the hurricane. For this reason, the EU considers that Spain needs a "second round" of measures after those adopted in May. "The more credible and fast they are, the more they will allow themselves to get away from the eye of the hurricane."
Specifically and despite the refusal of the Executive to compare itself with Ireland or Portugal, Brussels believes that the Government should " strengthen the credibility of consolidation " with new adjustment measures so that there is no doubt that it will meet the 6% target. In addition, he will be asked to undertake the reform of pensions and accelerate the restructuring of the savings bank sector. A restructuring that goes through "reducing the network where there are overlaps to gain margin".
In addition, the boxes must leave the market as soon as possible to raise capital, as allowed by the new law of boxes. Stress tests conducted in June already showed that some boxes need capital and also have assets that will continue to depreciate.
Failure of the European budget
On the other hand, the European Parliament (EP) and the Member States of the Union failed this Monday at dawn in the considered, a priori, as the last opportunity to agree on time the community budget for 2011 .
Despite agreeing on the figures for next year, the two institutions again clashed over the rejection of some countries, led by the United Kingdom and the Netherlands, to give more voice to the deputies in the design of future financing of The EU.
The failure will force, formally, that the European Commission (EC) present a new draft budget for the Council and the European Parliament to try to reach an agreement in extremis during the month of December.