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Fiscal stability 'key priority' for EU states

Wednesday 16 February 2011 - by Andrew Hickley

European parliamentarians have called for fiscal stability and strong public finances as a "key priority" in the wake of a deal on the EU's €500bn ($676bn) bailout mechanism.

Following a plenary debate with the European Council and Commission today, vice-chairwoman of the European People's Party Corien Wortmann-Kool warned member states that they must keep their finances in check above all else.

"Fiscal stability is essential for growth and employment," she said. "Member states with the most prudent fiscal policies are now performing best. This is our key priority."

Chair of the Eurogroup Jean-Claude Juncker, following an Ecofin meeting on Monday, confirmed that the European Stability Mechanism, scheduled to replace the temporary European Financial Stability Facility, would be funded to the tune of €500bn ($676bn).

Originally set up in response to the Greek crisis, the EFSF will be replaced by the ESM at the beginning of 2013.

Juncker said: "We've already agreed on the volume of the lending capacity of the ESM. We've agreed on the amount of €500bn, and this will be subject to regular revision."

However he cautioned that "nothing is agreed until everything is agreed" on the future of the bailout facility, with agreements expected to be finalised at a meeting in March.

EU Commissioner Olli Rehn said that there is an "unwritten understanding" that the International Monetary Fund would commit 50 cents for every euro spent through the ESM by eurozone countries, implying a figure of around €250bn ($338bn) will be contributed.

It was also announced at the Ecofin meeting that Peter Praet, director of the National Bank of Belgium, will take up a seat on the European Central Bank's executive board after being unanimously voted in.

He will replace Austrian Gertrude Tumpel-Gugerell, the only female member of the board, when her term expires at the end of May.

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