Board member Joerg Asmussen announced to a German business daily that the European Central bank (ECB) intends to back up the euro zone’s firewall by fusing whatever is left of its temporary bailout facility with its permanent fund. Eurogroup President Jean-Claude Juncker raised the suggestion of having the euro bloc to add up the remaining deposits in the European Financial Stability Facility with the 500 billion euros ($658.15 billion) that is purportedly intended for the European Stability Mechanism to form a super-fund. “In this way, we could reach 750 billion euros,” Asmussen told the Financial Times Deutschland, emphasizing the ECB’s motive in providing support.
However, other countries involved in the crisis reported that Germany – Europe’s largest economy and main paymaster – would only go to that extent provided that the bloc’s firewall is indeed in serious peril. At the same time, euro zone finance ministers have united to the idea of revaluating the sufficiency of the euro bloc’s bailout funds in March. Reiterating the pessimism of Mexico’s Finance Minister Jose Antonio Meade, Asmussen said that there might be the probability of having the Group of 20 finance ministers in coming up with the decision to supercharge International Monetary fund resources in Mexico City later this month. “Many non-European G20 states expect the Europeans to first build their own firewall and raise it, rather than other funds flowing into it again from outside Europe,” Asmussen said. He also added: “Maybe we can decide on additional IMF funds at the IMF spring meeting in April.”
The United States and Canada have given their stand regarding to committing extra funding to the IMF only if Europe has already taken the initiative to do more, starting with the announcing of new blueprints to take on the current crisis. It has been estimated that a funding of $600 billion is needed to impede the fallout from the crisis. Asmussen lashed out on growing economies for hoarding foreign reserves. He also added that the world is now heading to a multi-polar currency system, with the US dollar remaining the main player to majority of transactions, followed by the euro and sometime in 2030, the Chinese currency.
But Asmussen was quick to add that the Chinese Yuan could only be of greater significance in the international market if only the country made its currency to be more flexible. “This would require a reform of the Chinese banking sector and financial system,” he said. China has long been urged to allow its currency to float on the foreign exchange markets since this has been viewed to give it a raw edge in boosting exports.