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EU unveils $968-billion emergency bailout plan

A rescue deal involving loan guarantees to Eurozone nations is hashed out to shore up faltering European economies, and the euro.

May 09, 2010|By Henry Chu, Los Angeles Times

On Sunday, the German delegation in Brussels was reported to be balking at a proposal to make the new loan guarantees virtually unlimited. Berlin is mindful of strong public opposition at home to bailing out countries considered wasteful and irresponsible, and Chancellor Angela Merkel's party lost a key state election Sunday that deprived her of a majority in the upper chamber of the German parliament.

The new rescue fund is large, to be sure, but it is commensurate with the size of the potential problems facing the Eurozone. The Greek bailout alone is costing $142 billion, a figure some economists think will eventually rise; Greece's economy, however, is only one-fifth to one-fourth the size of Spain's.

Any bailout for Madrid probably would be far more expensive. Spanish officials have bristled at their country being compared to Greece, saying that although they are grappling with a ballooning budget deficit, Madrid's level of public debt is much lower.

The Spanish government insists that it will not need any assistance, despite the new rescue fund out of Brussels.

"Spain is not thinking about making use of this fund," Salgado, the finance minister, said.

henry.chu@latimes.com

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