EUROPACTS (2)

The next building block in the saving of the Euro was put in place in Copenhagen last week. The European Stability Mechanism (otherwise known as the firewall) was increased from Euro 500 billion to Euro 800 billion (US$1.1 trillion, there's that trillion word again). The deal was a compromise between the German paymasters, who wanted less, and other Member States, who wanted more.

The reality is that the Germans won, since the increase is less than it seems. First, since the ESM is being merged with the temporary facility, the EFSF, which has about Euro 200 billion left in it, after rescues of Ireland and Portugal. The Euro 700 billion is then bumped up to the headline figure of Euro 800 billion by including loans already made to Greece. In other words, there is not really any new money on the table; though the money already committed can now be used earlier than would otherwise have been the case.

Still, money now is always better than money later. And if the agreement helps to keep Spain from going the way of Greece, then it will have been a success. 

Walter Blotscher