Brussels - AFP
The eurozone finally gets its 500 billion euro rescue fund on Monday when finance ministers meet amid growing uncertainty over Greece's tortuous debt bailout and whether Spain will need help in turn. The formal launch and inaugural board meeting of the European Stability Mechanism comes just 10 days before the EU's 27 leaders hold a Brussels summit, with expectations low that there will be any breakthrough on the big issues. Greece will not get the green light, either in Luxembourg or at the October 18-19 meeting, for the resumption of its drip-feed bailout after differences with its EU, European Central Bank and International Monetary Fund creditors. EU-IMF-ECB officials have been locked in discussions with Athens over the need for more austerity measures while Greece insists it has done as much as it can and now needs more time to meet the troika's targets. Greek Prime Minister Antonis Samaras said Friday the country could not take more austerity and if its next aid tranche worth 31.5 billion euros ($40.6 billion) did not arrive soon, then by November state coffers would be empty. The October summit comes "considerably too early" to resolve the issues, a senior eurozone official said, given competing demands from the IMF, a newly-public alliance of eurozone hardliners Germany, the Netherlands and Finland, and Greek leaders from opposite ends of the political spectrum. Germany, the Netherlands and Finland last week appeared to put in doubt key commitments made at a June summit, which notably agreed that the ESM would be able to recapitalise banks directly once a single banking supervisor is put in place, hopefully by the end of the year. The three argued that the ESM should not be used to help those banks already bailed out before it became operational, a potentially heavy blow for the likes of Ireland which went bust after trying to keep its lenders afloat, and for Spain which has also recapitalised some of its banks and secured 100 billion euros from its eurozone partners to do more. Another EU official said this stand on 'legacy assets' must have been "very unwelcome" for Spain and bailed-out Ireland. Conceding that there was some room for differences on the issue, the official said, nonetheless, that "we would expect the conclusions of the European Council (June summit) to be adhered to." In the build-up to the eurozone and EU finance ministers' meeting in Luxembourg on Monday and Tuesday, much attention has been on Spain and whether or not it would ask for a bailout, activating the ESM and bringing the ECB into play on the government bond markets. The ECB has said it will intervene, buying up government bonds to bring down their borrowing costs if a member state first goes to the ESM for help -- which will also come with tough conditions. Spanish Economy Minister Luis de Guindos said Thursday that Madrid did "not need a bailout at all" and insisted that the government's tough austerity policies were putting the country on the right track. The first EU official said he did not expect any imminent developments on Spain, as Madrid's latest austerity package showed the country was "going in right direction," with deficit targets "not so easy to achieve" given the eurozone's slump into recession. At the same time, the recent easing of strains on the financial markets, in part due to the ECB's stance, suggest "market conditions are totally distant from any need for a full, macro-economic adjustment programme," he said. "We are very far away from that," the official added. For Germany, the Netherlands and Finland, the Greek and Spanish government funding conundrums should also be resolved in a "package" deal along with a demand from Cyprus for aid. The eurozone has extended "an open telephone line to Nicosia -- but so far, not too many telephone calls," the official said. The official said that radical proposals to coordinate eurozone state budgets were still at the "listening" stage while a French and German push to revive a controversial Financial Transactions Tax plan would likely generate some heated exchanges.