European ministers fought Monday over the best way to combat the debt crisis that has crippled the eurozone over the past year, risking to fuel a flare-up in financial markets, where patience with political dithering was running thin.
The interest rates on Portuguese government bonds were near euro-era highs, heightening speculation that the country might soon have to follow Greece and Ireland in seeking international help to service its rising debts. In those two countries, meanwhile, discontent over the harsh austerity measures imposed as part of their massive bailouts has been spreading from the streets to political decision makers.
Despite such ominous signs, the eurozone finance ministers in Brussels were still divided over how urgently they needed to decide on their next steps — and what those steps should be.
Luc Frieden, the finance minister of Luxembourg, said Portuguese yields have been rising, "probably because we are too slow in taking the relevant decisions."
His German counterpart Wolfgang Schaeuble, meanwhile, cautioned against rushing into new measures. "At the moment financial markets are so stable that it is probably better if we don't disturb them with unnecessary discussions," Schaueble said as he arrived in Brussels.
Eurozone officials have promised to present a "comprehensive response" to the debt crisis by the end of March. At the center of this response will likely be an overhaul of the currency union's 440 billion euro ($591 billion) bailout fund, its main crisis tool.
The European Commission, the European Union's executive, and some member states have been pushing governments to give the so-called European Financial Stability Facility new powers — such as buying government bonds on the open market, stabilizing their prices — and increasing the facility's funding so it can actually lend out the full 440 billion euros ($591 billion). At the moment it can only give about 250 billion euros ($336 billion) in loans because of several capital buffers required to make the bonds it issues to raise money attractive to investors.
On top of that, the Commission has suggested lowering the interest rates Greece and Ireland have to pay for their bailouts.
However, Germany, the biggest contributor to the European Stability Facility, has said it will only back new powers and money for the EFSF if in return the region's stragglers commit to making their economies more competitive.
That demand, backed by France, has created discord among eurozone governments, with some complaining that the demanded measures distract from plans to enhance economic governance in the currency union already tabled by the Commission. France and Germany say that the concrete measures to be included in their so-called "pact for competitiveness" are still up for debate, but according to documents circulated a few weeks ago they could contain demands to raise retirement ages, add limits to public debt to national constitutions and come up with a common base for corporate taxation.
"I'm not sure that the Franco-German proposal is the best way" to improve competitiveness, said Jyrki Katainen, the Finnish finance minister. He suggested that it might be more efficient to tag some of the suggested measures onto the Commission plans that are already more advanced.
Jean-Caude Juncker, the prime minister of Luxembourg who chairs the meetings of eurozone finance ministers also questioned the "added value" of the Franco-German proposals. "We are completely in the dark over the elements contained in that pact," he said.
The debate comes as cracks appeared in the willingness of political decision makers in bailed out Greece and Ireland to go along with the tough requirements of their rescue programs. The Greek government over the weekend issued an angry statement, accusing the European Union and the International Monetary Fund — responsible for a large portion of the bailout — of overstepping their role and interfering in its internal affairs. They are unhappy about a new requirement for the Greek government to sell off 50 billion euros ($67 billion) in state assets by 2015, far more than previously agreed.
In Ireland, the two parties likely to win general elections scheduled for Feb. 25 have said they want to renegotiate the terms of the countries' bailout program and signaled that they are unwilling to inject much more money into Ireland's struggling banks.
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