Investor responsibility divides euro countries
Finland, Germany, and The Netherlands want mention of investor responsibility in treaty
Northern and southern countries in the euro zone differ on the extent to which responsibility of the private sector should be defined in the planned permanent crisis fund.
Some of the southern countries do not want to include any mention of the responsibility of the private sector in the text, which establishes the foundation for a European Stability Mechanism (ESM).
The southern euro countries also do not want a mention that the crisis fund and the International Monetary Fund would have a privileged position with respect to other creditors.
The northern countries in the Euro Group, which enjoy the best credit ratings, take a different view.
Finland, Germany and The Netherlands want a specific reference to investor responsibility either in the text of the treaty, or at least in its preamble. The countries also want a mention of the ESM’s privileged position among creditors.
Of the six other AAA-rated countries, France, Austria and Luxembourg are not as insistent in their demands as the others.
The ESM is to be launched in the summer of 2013 for the purpose of providing credit for euro countries facing financial trouble.
The countries involved have already agreed that the ESM will not offer credit to hopeless cases if the private sector does not bear some responsibility for the losses.
To expedite possible credit arrangements from 2013 onwards, bonds issued by euro zone countries would include a clause on cooperation to ease the process. The countries also agreed in March that there would be a special mention of the primacy of ESM receivables.
Several southern euro zone countries reportedly now want to drop any mention of investor responsibility, or ESM privilege.
A version of the draft treaty shown to Helsingin Sanomat on Thursday retains a mention of investor responsibility for mention either in the preamble or in the 12th paragraph of the agreement itself. The ESM privilege is included in the preamble.
The financially strapped southern euro zone countries nevertheless want to drop such specific references, for fear that investors might become less willing to lend money to those countries under such conditions.
There is some support in the European Commission for the view of the southern members.
The Commission feels that there is no need to make an explicit mention in the treaty text, and that a political decision on investor responsibility is enough.
Germany nevertheless feels that it is important for the responsibility of the private sector to be firmly established in the permanent crisis fund.
The Euro Group hopes to reach agreement on details of the ESM in June. A new draft of the agreement is expected to come out in the coming days.
The main points of the ESM are to be ironed out at a summit of EU leaders in Brussels at Midsummer.
Previously in HS International Edition:
SDP’s Heinäluoma sees euro guarantee stance as biggest change in Finnish EU policy in 16 years (16.5.2011)
Rehn defends Portugal bailout plan (11.5.2011)
Timo Soini recipe for euro crisis: let insolvent banks fail (10.5.2011)