EU Finance Chiefs Starts Two-Day Meeting In Brussels, Where The European Rescue Fund Could Be ...

EU finance Ministers' two-day meeting starts today at 5 p.m. today in
Brussels headed by Luxembourg Prime Minister Jean-Claude Junker who
will give a brief outcome of the meeting in late evening.
The meeting that gathers chiefs of 17 nations using the European
common currency will discuss the possibility of giving more
flexibility to the European rescue fund to help the region's heavily
indebted nations such as Portugal, Spain and Italy through buying
bonds on the primary market, bond swaps and other credit lines.

EU leaders meeting last meeting in 2010 came out with an agreement to
put a permanent mechanism for combating potential debt crisis starting
from 2013, while Germany proposed to offer financial aid if it is very
necessary where bondholders would participate in some costs of future
bailouts, while it refused expanding the 750 billion euros lifeline
introduced in May.

Nevertheless, the expansion of the 440 billion-euro package is now
possible after Germany has eased its opposition to enlarging the fund
or giving bailouts for other countries like Portugal, which is the
expected candidate to get a bailout after the two aids provided to
Greece and Ireland in 2010.

Chancellor Angela Merkel said last week that her country is reading to
do anything to save the euro after it fell to four-month low at the
beginning of last week whereas bond yields and cost of insuring
against default rose to record last week.

However, successful bond selling by Portugal, Spain and Italy managed
to mitigate tensions in markets, helping the euro to rebound to
one-month high on Friday and bind yields to cool down.
The German tone is now different from the end of last year when it
opposed proposals including giving rescue to any country, confirming
that euro-zone economies should rely on themselves in shoring back
their economies rather than waiting for an aid, referring that Germany
will have the lion's share in any bailout.

Speculations rose since the beginning of this year that Portugal is
under dual pressure from Germany and France to accept a bailout from
the EU and IMF to ease woes in markets, yet the Portuguese Prime
Minister said his country is able to withstand the fiscal crisis
without any external support.

Trichet in the press conference following January's rate decision
focused only on inflation after it rose to 2.2% in December without
talking about bond purchases of highly indebted nations by the bank.
The ECB, however, already purchased Portuguese debt which actually was
subject to criticism as it may cause more rise in bond yields, thereby
resulting in more tensions in markets.

Meanwhile, there are more concerns before the deadline for boosting
the 440 billion-euro fund before the expiry of the European Financial
Stability Facility and the debut of the European Stability Mechanism
(ESM) to resolve crises from mid 2013.
Source: ActionForex.Com