Reuters - Video

Edition: US | UK | IN | CN | JP

Finance Videos

Europe bailout boost mooted

Wednesday, July 25, 2012 - 02:10

July 25 - Growing concerns over a full Spanish bailout and ways for Europe to fund indebted countries have sparked debate over how to inject more cash into rescue funds. Joanne Nicholson reports

▲ Hide Transcript

View Transcript

Relief for hammered Spanish and Italian stocks came on Wednesday after a European Central Bank policymaker said there were grounds for boosting the scope of the euro zone's bailout fund. Ewald Nowotny says there are merits to giving Europe's permanent rescue fund a banking license. This would allow it to exchange the bonds it has bought for cash, to support highly indebted countries. The Austrian central bank governor has broken ranks with his colleagues at the ECB, who say the idea would be thinly disguised monetary financing of governments. Peter Dixon is an economist at Commerzbank. He believes the fund needs more firepower, but this won't be a permanent solution. (SOUNDBITE) (English) PETER DIXON, ECOMIST, COMMERZBANK, SAYING: "Raising the rescue funds just gives additional time to the markets and individual economies to ensure that any harsh decisions taken in future can be managed because if we have to default on some Spanish debt it would have major ramifications for global markets. If in five years time the same condition has to be met perhaps it will be marginally less painful for the international economy." But not everyone in the markets thinks Nowotny's comments will have any real impact on policy. (SOUNDBITE) (English) DAVID PAGE, ECONOMIST, LLOYDS BANK, SAYING: "We take little solace from the fact that one member of the ECB has suddently woken up to the fact that we need a bigger firewall. That argument has been out there for two years and has not met with much response yet." Pressure on Spanish government bonds yields has eased but that will do little to help Spain's borrowing costs. Catalonia is the latest region to suggest it might seek emergency aid from the Spanish government - it's one of several of 17 autonomous regions to do so in the past week. And while the troika of lenders assess whether or not Greek reforms are on track, the scene was of protest against the planned government cuts. The ECB, IMF and the European Commission say they'll revisit Athens in September, and that until then Greece would have to find an intermediate way to cover their financing needs for August. Joanne Nicholson, Reuters

Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code

Europe bailout boost mooted

Wednesday, July 25, 2012 - 02:10