Eurozone vows to fix, defend its finances

10:16, May 19, 2010      

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People pose beside the Wall Street bull, a bronze statue that symbolizes a bull market in New York. US stocks climbed Tuesday as fears over the European debt crisis eased a little after Greece received rescue funds and staved off a debt default. Photo: AFP

Eurozone finance ministers vowed Tuesday to fix the region's finances after expressing concern at the plunging euro, but announced more talks to finalize the massive rescue fund for debt-hit members.

The chairman of the 16-strong eurozone group meanwhile backed controversial plans for Brussels to vet budgets in all 27 European Union countries before they are put to national parliaments.

Luxembourg Prime Minister Jean-Claude Juncker insisted, however, "The commission is not going to become the school headmistress for member states' budgetary policies."

Juncker was speaking eight days after the EU and the International Monetary Fund announced a 750-billion-euro (close to $1 trillion) rescue plan for heavily indebted members.

Eyes had been on Brussels where finance ministers of the eurozone states are trying to agree funding arrangements for the bailout for struggling economies, which many fear may not be enough to prevent a financial meltdown.

"The euro is a credible currency," Juncker said, while conceding, "I am not worried by the current exchange but by the speed at which the exchange rate deteriorated."

The euro edged up Tuesday and Asian markets rose on bargain hunting after hitting earlier lows due to news that a eurozone crisis meeting failed to reach a deal on a rescue fund.

"A resurgence in US trading after Tuesday's European close has locked in a positive start for the trading session today, with the heavyweight miners, banks and energy firms all making gains to lead indices higher," said City Index analyst Joshua Raymond.

Oil prices also bounced back from seven-month lows Tuesday as the euro strengthened against the dollar, traders said.

But fears of a contagion of the debt crisis undoubtedly still linger at markets.

"Trading continues to be choppy and this means that there remains a question mark over whether index gains can garner momentum," Raymond said.

Meanwhile, a chief economist of Germany's biggest bank warned Tuesday that the European Central Bank (ECB) risks turning into a "bad bank" if it keeps buying government bonds from the heavily-indebted eurozone countries.

"Markets fear that the ECB will be used as a spill basin ... because some countries that have issued bonds bought by the ECB could default on their debt despite the support they have received."

Meanwhile, upon receipt of a 14.5-billion-euro slice of EU loan support, Greece also pledged its ability to repay the debt it badly needs one day prior to a debt deadline.

"We are not begging for alms," Prime Minister George Papandreou said. "We are ask-ing for loans which will be repaid at high interest. Greece constitutes a good investment, of this I am certain."

However, the much depreciated currency is also a boon for the region to some extent.

Figures showed Tuesday the eurozone's trade surplus with the rest of the world soared to 4.5 billion euros ($5.5 billion) in March, boosted by the single currency's weakness.

"The fact that the euro today is not as strong is a real advantage for exports," said France's minister Patrick Devedjian in an interview with French radio, "this is not a tragedy."

Source: Global Times
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