European Union Economic and Monetary Affairs Commissioner Olli Rehn said the region will toughen debt-crisis defenses to guard against future risks.
“The key thing now is to conclude the comprehensive crisis response,” Rehn told reporters today in Saariselkae, Finland. Rehn said he trusts that euro-area finance ministers “will take a convincing decision on the reinforcement of the firewalls” next week.
Europe has so far set aside a total of 500 billion euros ($663 billion) for crisis-busting measures in two war chests. The temporary rescue fund, the European Financial Stability Facility, has disbursed 192 billion euros in three bailouts. Under the current rules, the unused funds would be passed on to the permanent fund, the European Stability Mechanism.
Policy makers are discussing how to add to the funds. Under the least-ambitious option, the ESM would be allowed to start afresh with its entire half-trillion euro capacity available for future use, a euro-area official said on March 16. The EFSF would continue to administer the programs in progress while its unused capacity would no longer be available. That would bring the total crisis backstop to 692 billion euros.
“Luckily the economic situation is a little bit better than just a few months ago,” Finnish Prime Minister Jyrki Katainen said at the briefing. He hosted a seminar in Saariselkae, 1,100 kilometers (684 miles) north of Helsinki and past the Arctic Circle, to brainstorm on Europe’s role in the global economy and how to get the European Union’s economy back on track after the debt crisis.
Spain will reach the target of reducing its budget deficit to 3 percent of gross domestic product next year, Inigo Mendez de Vigo, Spain’s minister for European affairs, told reporters. “We’re going to do it,” he said. “We’re on the way and we’re serious. We’re going to give our word.”
Rehn said he’s “fully confident” Spain will meet the fiscal target in 2013.
The European Central Bank stepped in to quell the acute crisis by lending banks about 1 trillion euros for three years and by keeping its benchmark interest rate at a record-low of 1 percent. It has also bought bonds of countries whose yields rose last year.
The ECB “has played a key role,” Rehn said. The lending helped “prevent a credit crunch” and improved financing conditions for European businesses and households, he said.
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