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Luxembourg - Euro finance ministers fixed an unprecedented €440bn fund to dig debt-laden partners out of the mire, pressured by a dizzying fall for the single currency on Monday.
"We signed a few moments ago," said Luxembourg Prime Minister Jean-Claude Juncker, after world stocks plummeted on market anxiety that non-euro Hungary was entering a Greece-style meltdown in its public finances.
Juncker, who chairs the Eurogroup of finance ministers, said "some member states," namely Belgium and Slovakia, had still to ratify but a diplomat stressed that Germany had put pen to paper on the facility worth $525bn.
Almost one month after countries agreed a trillion-dollar "backstop" facility in conjunction with the IMF, EU economic and monetary affairs commissioner Olli Rehn said the step showed there was "no uncertainty left."
While Portugal and Spain were warned by Juncker and Rehn that they will need more cuts and reforms to their labour markets to meet tighter deficit targets, Rehn said countries applying for cash loans would face a certain squeeze.
Loans would be "strictly conditional" and there "would have to be a programme agreed with the country concerned with the EU and the IMF," as was the case with Greece's €110bn bailout.
Non-euro Poland and Sweden have also said they support the scheme's general principles, but Germany won an important concession by ensuring that nations did not collectively guarantee the full extent of loans.
Rehn explained that individual country guarantees would cover the vast majority of the sums involved, with a premium putting a veneer of collective solidarity on the deal to assuage market fears in the event of default.
In Luxembourg, International Monetary Fund chief Dominique Strauss-Kahn hailed the move, and said he thought markets would "bit by bit" take a more "impassioned" view of numbers.
Dutch Finance Minister Jan Kees de Jager earlier complained that Britain, Japan and the United States each have deficit and debt levels worse than the eurozone average, but had not come under the same pressure from traders.
Talks involving ministers from the full 27-nation European Union followed to address the heated issue of how far to join up cross-border "economic government."
That came just hours after planned talks between French President Nicolas Sarkozy and German Chancellor Angela Merkel were abruptly postponed.
Merkel herself on Monday unveiled government spending cuts worth 86 billion euros by 2014, in moves echoed in Britain.
"The markets want to see not only explanations, but also action," her finance minister, Wolfgang Schaeuble, had earlier underlined.
While the speed of the euro's fall was a worry for Rehn, Juncker insisted he was not concerned - and the eurozone also gave its blessing, to be formally endorsed by EU peers on Tuesday, to Estonia becoming the 17th eurozone country from January 1 2011.
The euro had earlier dipped below $1.19 for the first time since March 2006 and also plunged to its lowest level in more than eight years against the yen.
Belgian Finance Minister Didier Reynders stressed that the eurozone could benefit from cheaper exports, although Neil McKinnon of VTB Capital said worries about a "double-dip" recession were rising.
In Washington, the IMF warned that the time to end "fiscally unsustainable policies" in some eurozone countries and "deficient governance" of the mini-bloc had come.
"Policies need to move urgently from crisis management to fundamental reforms," the Fund said.
Separate moves on cross-border economic government saw ministers agree in principle to design concrete sanctions for countries that consistently breach deficit and debt levels.
EU president Herman Van Rompuy said they also agreed to submit national budgets to peer review, although Britain and France failed to see eye-to-eye on whether London's would be shown before, simultaneously or after its domestic parliament.
- AFP
