EU Finance Chiefs Race to Ready Euro Stability Fund

By James G. Neuger and Gregory Viscusi

May 9 (Bloomberg) — European Union finance ministers meet today to hammer out the details of an emergency fund to prevent a sovereign debt crisis from shattering confidence in the 11- year-old euro.

Jolted into action by last week’s slide in the currency to the lowest in 14 months and soaring bond yields in Portugal and Spain, leaders of the 16 euro nations agreed to the financial backstop at a May 7 summit. They assigned finance chiefs to get it ready before Asian markets open later today European time.

“We will defend the euro, whatever it takes,” European Commission President Jose Barroso told reporters in the early hours yesterday after the leaders met in Brussels.

Europe’s failure to contain Greece’s fiscal crisis triggered a 4.3 percent drop in the euro last week, the biggest weekly decline since October 2008. It prompted the U.S. and Asia to urge broader steps to prevent a global sovereign-debt crisis from pitching the world back into a recession.

“Europe is getting its act together,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Time will tell if this statement is enough to satisfy the European bond market vigilantes.”

European officials declined to disclose the size of the stabilization fund, to be made up of money borrowed by the EU’s central authorities with guarantees by national governments. Finance ministers will meet at about 3 p.m. in Brussels. A press briefing is scheduled for 6 p.m.

‘That’s Significant’

To read more, visit: http://www.businessweek.com/news/2010-05-09/eu-finance-chiefs-race-to-ready-euro-stability-fund-update1-.html

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