EU to decide on firewall in March, ECB says clock ticking

Fri Mar 2, 2012 9:29am EST
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By Luke Baker and Robin Emmott

BRUSSELS (Reuters) - The euro zone will decide whether to increase its debt crisis firewall before the end of March after the European Central Bank said its extraordinary support measures would not be repeated, putting the onus squarely back on governments to act.

Speaking after a two-day summit of EU leaders, Herman Van Rompuy, the president of the European Council, said euro zone finance ministers would meet to discuss the size of a permanent rescue fund, probably at an informal gathering in Copenhagen set for March 30-31.

The aim will be to combine the 250 billion euros left in the temporary EFSF bailout fund with 500 billion euros in the permanent ESM facility to create a "super-fund" better able to cope with potential problems in Spain or Italy, although Germany remains opposed to the idea for now.

"We will revaluate the ceiling for the ESM and EFSF during the month of March," Van Rompuy said, adding that countries would pay two tranches of capital into the ESM this year, ensuring that a strong facility is running from July.

French President Nicolas Sarkozy said he and German Chancellor Angela Merkel had agreed to resolve the firewall "by the end of March," reiterating the deadline.

The stepped-up commitment followed a firm message from ECB President Mario Draghi at a dinner late on Thursday, during which he warned the EU's 27 leaders against complacency, after several had suggested the worst of the crisis may be over.

"It was a subdued message," said one euro zone diplomat briefed on Draghi's intervention. "He said there were timid signs of stabilization but emphasized that the overall situation was fragile."

Speaking after the summit, Merkel made clear the crisis, which began in 2010, was far from over.   Continued...

European Council President Herman Van Rompuy holds a news conference at the end of a European Union leaders summit in Brussels March 2, 2012. REUTERS/Sebastien Pirlet