Searching for euro zone's big bail-out bazooka

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Searching for euro zone's big bail-out bazooka

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Are we really witnessing the last moments of the single currency? Even though the euro zone appears to be racing towards an almighty crash, the bloc’s leaders continue to insist they will do whatever it takes to avert disaster. A large chuck of that hope rests with EU’s bail-out fund, the EFSF.

Currently the euro zone’s rescue pot has 440 billion euros. No where near enough to protect the single currency’s biggest economies, like Italy and Spain, should they suddenly need a bail-out.

But, a month after a plan was agreed to reinforce the fund, finance ministers are still struggling to find the money they need. Many experts say investors are nervous about taking risks during such uncertain times.

Stephen Fidler, the Brussels Editor of the Wall Street Journal, told euronews’ Paul Hackett: “The idea even in the best case, some people were talking about just a few weeks ago, that you could get to, say, two trillion euros, it’s not really going to be anywhere near there. And one trillion euros seems to be what people are now talking about, but I think even that is questionable. The ECB is not giving a lot of confidence that it’s going to be there in the long term to support the markets and therefore confidence has evaporated.”

Cartsen Brzeski, a senior economist from ING Bank, argues that the crisis has escalated to such a level, that it is time for the European Central Bank to step in.

“Right now I think it’s time for the ECB to enter the game and to enter the game at a very large level, to come up as an unconditional lender of last resort. You need to ensure that the governments of the countries in question really continue with austerity measures, with structural reforms, and in return they will have the ECB being the lender of last resort.

But Germany remains totally opposed to the European Central Bank taking such a big step.

Peter Altmaier, head of German Chancellor Angela Merkel’s CDU parliamentary party group, said: ‘‘Make no mistake about it, the ECB on the basis of its independence has taken action for many many months already. The ECB has bought state papers on secondary markets, from Spain, from Italy, from other countries. The ECB has played a very active role. (However) it is entirely wrong to argue a role of the ECB as lender of last resort.’‘