After five hours of talks, euro zone ministers decided to take no new action regarding the debt crisis, despite indications to the contrary earlier Monday. Jean-Claude Junker, chairman of the Eurogroup, told reporters, “We don’t have any new decision to announce to you,” according to a Reuters report.
Suggestions that the rescue facility’s amount might be increased and that the euro zone might even issuejoint bonds fell by the wayside as the group decided the facility was large enough. The bond issue was never even brought up. Instead, ministers discussed Spain and Portugal and addressed the European debt crisis with Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF). The European Central Bank (ECB) did not intervene with any action of its own, despite last week’s bond buying to stabilize markets.
The group even failed to reach agreement on its 2011 budget, which now may have to be discussed at a planned summit Dec. 16-17. Without agreement, the group’s spending will remain the same as in 2010; there had been an agreement in principle to raise the budget by 2.9% for 2011, but some member nations objected to some of the parliament’s demands. There is still a possibility that consensus will be reached; several member nations do not want budget talks linked to a scheduled discussion on a proposed permanent debt crisis resolution mechanism.
Financial markets had expected some sort of action from the group. However, instead of falling, global equities and the euro both rose, the former on an expected tax cut compromise in the U.S., and the latter on expectations that Ireland’s budget would pass later in the day. Bond spreads on Spain and Portugal increased; the spread on Ireland’s bonds fell in expectation of budget approval. Gold reflected market unease; it rose to new record highs in response to the unsettled situation in Europe.
On Tuesday, in contrast to Monday’s no-action meeting, all 27 member nations of the European Union (EU) approved Ireland’s bailout package; Ireland’s budget will face its parliament later Tuesday as the gateway to the rescue.