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December 06, 2010 at 11:33 AM
Euro zone leaders gathered Monday in Brussels to discuss a new report from the International Monetary Fund (IMF) and to call for additional measures to restore calm in the financial markets, as Germany resisted expansion of aid efforts. Investors took profits from three days of increases in the value of the euro, which slipped 0.06% to $1.33, reacting to a lack of agreement from finance ministers on the best ways to handle the spreading economic difficulties of the European Union (EU).
As reported earlier, Dominique Strauss-Kahn, chief of the IMF, was to present a report that called not only for an increase in the rescue facility, which currently stands at 750 billion euros ($998 billion), but also for additional bond buying by the European Central Bank (ECB) and more stringent austerity actions by member nations. Spain’s efforts in that direction on Friday, however, resulted in a wildcat strike by air traffic controllers that resulted in a national state of emergency. Other nations have seen demonstrations and even violence in the streets as austerity measures have been approved or put in place.
Germany’s Chancellor Angela Merkel has already voiced opposition to the idea of nations increasing their contributions to the rescue facility, calling it unnecessary and saying instead that other nations should institute further austerity measures. However, according to a Reuters report, even the usually stable Bunds on Monday saw their yield spreads increase, along with the cost of insuring the debt.
Merkel also resisted the suggestion by two finance ministers for the issuance of a joint euro bond that would be guaranteed by the entire euro zone. She said such an instrument would reduce competition and any interest rate incentive for good financial behavior on the part of member nations, and added that the EU treaty did not allow for the issuance of such common bonds.
