The EFSF. Why not use it?

jane5

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Mar 12, 2009
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138
I have a question, was wondering if anyone could explain something to me.

The peripheral Eurozone countries are seriously hampering the strength of the Eurozone, and may derail economic recovery for it altogether, right?

The Irish problem is one of the worst, by all accounts, and is predominantly the result of bailing out banks whose bonds etc are owed in a large part to European investors.

Why doesn't the EU just use the European Financial Stability fund to bail out selected Irish banks, Spanish banks, etc, and er, financially stabilise the EU?

It seems like far and away the simplest thing to do. The fund is, I think, in the order of 400 billion or so. So use say, half, in targeted bailouts, THEN set budget targets and rules etc to follow in future. Everybody wins.

Why aren't they doing that?
 


Joined
Aug 6, 2010
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66
If they don't do that then the countries have to reform their expenditures, which is probably what they want these countries to do first before a bail out. Also I was just thinking about this and I'm probably completely wrong but if the yield on bonds is going way up that means the price of the bonds is going way down and if the yield is getting higher doesn't that make it cheaper for the ECB to buy them? (In the secondary market I mean. I know this means we can't borrow from the market in the normal way because of this).
Actually reading all that back is even confusing me now. Stupid bonds.

I just don't see how it's all a loss to the ECB as long as we don't default on the bonds. Having said that I guess it is a loss to them if we do default.
 

hmmm

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Oct 4, 2006
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Because the fund isn't big enough to "bail out" the whole rotten system. It is there as a last resort, and should only be used as a last resort, because if it doesn't work then alternative is a nightmare for the country involved and potentially the Eurozone as a whole. As a consequence, the penalties for going to the fund will be severe in terms of imposed economic cutbacks - those countries who haven't run their economies incompetently are not going to give taxpayers money away for free to the gob************************es.

It's not meant to fix the problem, it's a safety net if the individual country fails in their own efforts to fix the problem. Because the fund will effectively take control, they will see to it that the problem is fixed.
 

hammer

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Jul 6, 2009
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58,180
Commenting on today's agreement, Finance Minister Michael Noonan said it successfully brings to a conclusion negotiations and will reduce the market refinancing requirement by €20 billion over the period 2015 to 2022.

''This builds upon the successful promissory note negotiations which reduced the market refinancing requirement by €20 billion over the next 10 years,'' Mr Noonan said in a statement.

''Taken together, the successful conclusion of both sets of negotiations has delivered a cash flow benefit of €40 billion over the next decade and will further strengthen our ability to make a full and sustainable return to the markets,'' he added


Excellent. Well done Michael.

Cleaning up the mess left behind by the ***** FF and Anglo
 


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