Publications
Partners
Copenhagen - Eurozone nations are set to clash Friday over boosting the zone's firewall against its debt crisis, as Spain's fiscal woes stokes fears that the bloc could yet be pitched into a new emergency.
Under huge international pressure, finance ministers from the 17-nation currency zone gather for a two-day meeting in Copenhagen to consider ways to bolster defences against a resurgence of the worst economic crisis in the bloc's history.
Ministers agree that the firewall needs to be strengthened from the current maximum lending capacity of €500bn which the eurozone permanent bailout pot, the ESM, will have when it comes into force in July.
But member countries are divided over how much more money should be laid aside, with France and the European Commission eyeing near to a trillion euros in funds while Germany, Europe's top economy and paymaster, remains much more cautious.
According to well-placed European sources, there are three main options on the table.
These alternatives would boost the headline figure by anywhere between €700bn and €940bn but will likely also include money already pledged to debt-wracked countries such as Greece, Ireland and Portugal.
Eurozone officials, seeking a compromise, are proposing a formula that would give the bloc €940bn for one year, sources close to the negotiations have told AFP.
The fund would be reviewed in the summer of 2013, and "if there is no need to keep this system, we would return to around €700bn", one of the sources said.
Meanwhile, Europe's partners from Washington to Tokyo and including groups such as the International Monetary Fund (IMF) want to see the bloc ring-fenced as effectively as possible against a new crisis that would affect the whole world.
The Organisation for Economic Cooperation and Development (OECD) set the cat among the pigeons earlier this week by calling for a €1 trillion pot, which OECD head Angel Gurria calls "the mother of all firewalls".
And leading and emerging nations of the group of 20 (G20) have said they will only consider lending more to the IMF to combat the eurozone crisis if the bloc first stumps up enough cash to tackle its own problems.
Members of the IMF will meet in late April to consider a request to boost the body's lending capacity by $500bn in case it is needed to bail out another eurozone country.
The eurozone meeting in Copenhagen comes amid violent turmoil in Spain as the government prepared to unveil more austerity measures to tackle a spiralling budget deficit in the face of a general strike.
Hundreds of thousands of protesters swamped Spain's streets on Thursday to back a general strike, marred by clashes in Barcelona.
Spanish borrowing costs have risen in recent weeks after Madrid admitted it had missed its 2011 deficit target of 6.0% of gross domestic product, reporting 8.5% instead.
Another thorny issue facing the ministers is to reach agreement on a raft of top EU appointments, likely to result in a difficult session of horse-trading.
The Eurogroup of eurozone finance ministers must find a replacement for its current head, Luxembourg's Prime Minister Jean-Claude Juncker, as well as a new member for the six-person executive board of the European Central Bank (ECB).
Current German Finance Minister Wolfgang Schaeuble is one possible candidate to replace Juncker but may run into resistance from some countries due to his hardline stance on deficits and austerity.
The current head of the central bank of Luxembourg, Yves Mersch, is seen as the favourite to clinch the ECB job.
However, a decision on the new Eurogroup head is unlikely at the Copenhagen meeting, with French Finance Minister Francois Baroin saying Paris would rather wait for the results of the French elections on May 6.
