Commission will consider permanent rescue mechanism

Olli Rehn says idea of permanent rescue fund for eurozone countries will be revisited.

Olli Rehn, the European commissioner for economic and monetary affairs, wants to revisit the issue of whether the EU should have a permanent mechanism to help countries that encounter a sovereign debt crisis.

 

Earlier this year, the countries of the eurozone put in place a temporary mechanism, the European Financial Stability Facility, that can provide up to €440 billion in emergency loans to eurozone governments. But the shelf-life of the EFSF is limited to three years. The EU had already put in place a specific mechanism for Greece, worth €110bn, funded both by eurozone countries and the International Monetary Fund.

But the idea of a permanent crisis mechanism has so far been a step too far for some countries, particularly Germany. Some perceive it as breaching the EU rule that there can be no bail-out for eurozone countries.

But speaking at a conference on the euro organised in Berlin by The Economist Group, Rehn said that the European Commission would return to the idea of a permanent mechanism “in the course of next year” and would “possibly make a proposal”. He said the proposal would follow an analysis of the experience of the Greek loan facility and the EFSF.

Asked about the existing opposition to the idea, he said the Commission should continue “strong and creative” discussions.

George Papaconstantinou, Greece’s finance minister, said at the same conference that “ad hoc solutions are OK, but they are second best”.

“The crisis screams out for a solid reworking of the institutional architecture,” he said.