Market pressures mounted on Monday before a meeting of eurozone finance ministers to follow up quickly on action agreed last month to tackle the debt crisis.
Eurozone finance ministers meet Monday under pressure to push ahead quickly with measures agreed last month to tackle the debt crisis as market sentiment turns increasingly negative., Photo: AFP Photo/Philippe Huguen
Borrowing rates for Spain and Italy rose, with the Spanish 10-year rate surging back above the danger level of 7 percent, amid scepticism that the meeting would make much progress.
The first issue of business is what to do to help Spain's stricken banks after a so-called "breakthrough" June 28-29 EU summit promised Spanish banks direct funding soon -- but that is dependent on setting up a new EU bank regulator.
The summit agreed that the new regulator would supervise the banks overall, keeping them in line, and also make it easier for the bloc's new bailout fund, the European Stability Mechanism, to help states in trouble.
After an initially euphoric response at the separation of bank debt from national debt, markets turned negative again on Monday.
They pushed Spanish long-term borrowing costs above 7.0 percent, the level which forced Greece, Ireland, Portugal into massive EU-IMF bailout deals.
Italy too was also under pressure as European stock markets opened weaker following losses in Asian trade earlier Monday.
On Saturday, Spanish Prime Minister Mariano Rajoy announced that he would take additional steps soon to cut the public deficit and called for quick progress on the summit agreements.
"What will really determine their success is that they turn into concrete realities, in a supple, quick and effective way," Rajoy said, adding: "Europe must fulfill the accords as swiftly as possible."
French Finance Minister Pierre Moscovici said that Monday's meeting would "translate into action" the summit decisions but added that there would be another gathering "in July, on July 20 I think."
Moscovici, who met Italian Prime Minister Mario Monti on Sunday, said "one has to go further" to help the Spanish banks and "move quickly" on tighter banking regulations to speed up bailouts to struggling lenders.
German Finance Minister Wolfgang Schaeuble, however, played down the prospects that Spain would get help for its banks anytime soon, insisting on the quid pro quo of tighter overall regulation first.
"Before direct aid is given to the banks, there must be a common banking supervisor," El Pais quoted Schaeuble as saying. "But this body will not start functioning this year. That is not very realistic," he added.
One Spanish newspaper report suggested that a condition for help for the Spanish banks would be a tightening of the banks' capital base.
In turn, Italy's Monti said he wanted the finance ministers to implement the decisions "rapidly in operational terms."
Monti, among others, had described the June 28-29 summit breakthrough accords as coming only after Germany had made significant concessions, a view Chancellor Angela Merkel has consistently rejected.
Greece meanwhile has asked for more time on its latest debt bailout, saying that while it accepts the tough terms, it needs some slack so as to ease the pressure on an economy stuck deep in recession for a fifth year. The country is again behind in meeting targets under its rescue programmes.
In Brussels last week, an EU official said Greece would not get its next instalment of aid "until the Eurogroup (of finance ministers) has determined that the programme is back on track," with no decision likely until August.
Helping remove once source of uncertainty, the new Greek government comfortably won a confidence vote late on Sunday.
Monday's meeting is also expected to discuss who should succeed Luxembourg's Jean-Claude Juncker, who is due to step down on July 17, as head of the eurozone finance ministers group.
Moscovici said France wanted Juncker to stay on, until a "possibly more lasting solution" can be found to the debt crisis.
The German weekly Der Spiegel reported that Paris and Berlin have reached a compromise whereby Schaeuble would head the group next year, with Moscovici following in 2014.
"I don't know where this rumour came from but for now it is not on the cards," Moscovici said, adding that the Eurogroup was set to make a number of appointments on Monday including a successor to Juncker.
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