COPENHAGEN (MNI) – By bolstering its firewalls against the spread
of the sovereign debt crisis, Europe should convince international
partners that it is doing its part to calm financial markets, German
Finance Minister Wolfgang Schaeuble said Friday.

Earlier today, the Eurogroup decided to add the existing resources
of the European Financial Stability Facility to boost the effective
firepower of the permanent E500 billion European Stability Mechanism to
E800 billion.

“The current overall ceiling for ESM/EFSF lending, as defined in
the ESM Treaty, will be raised to E700 billion,” the Eurogroup said. The
remaining E100 billion come from E49 billion out of the EFSM and E53
billion out of the bilateral Greek loan facility already paid out to
support current programme countries.

“As far as the international discussion calling on the Europeans
to do enough is concerned…Europe is now expending E800 billion,”
Schaeuble told reporters following the Eurogroup meeting here, noting
that this exceeds the magic $1 trillion many had called for.

A larger European firewall is a pre-condition for an increase in
the International Monetary Fund’s resources at the upcoming spring
meetings that could give the fund additional firepower should a larger
Eurozone country face troubles.

While the bigger firewall does meet demands for $1 trillion, E300
billion of the total sum has already been commited to running programs,
leaving the permanent ESM bailout fund with E500 billion. It is thus not
clear yet how other IMF shareholders might react.

Schaeuble argued that the debate over the firewall had been
terribly misleading. “Financial markets want to know whether the
Eurozone is in the position to create structure to ensure permanent
stability in the regions,” he said.

Only if the underlying problems are resolved, can the crisis be
overcome permanently, Schaeuble said. “Otherwise you can put E10
trillion in the fund and it still won’t do any good.”

Eurozone has made significant progress towards tackling underlying
problems, Schaeuble observed, noting that Portugal and Ireland are
“doing a good job” in their reform efforts and there is broad popular
support for reform efforts in Spain and Greece.

“We are not out of the woods yet but we are on the right path,” he
said

Schaeuble noted that the “German government has taken on additional
risks,” with the debt-crisis spawned bailout funds. Those risks must be
seen in conjunction with the chances that the Eurozone has offered
Germany, he said. “Those chances have already been realized, making us
economically incredibly successful.”

–Frankfurt newsroom +49 69 72 01 42; e-mail jtreeck@marketnews.com

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