European finance ministers yesterday ruled out any fresh moves to stimulate the eurozone economy, despite forecasts that growth is about to grind to a halt. The head of the Euro Group, Jean-Claude Juncker, said: "We don't see any room for manoeuvre in the euro area which could allow us to launch new fiscal stimulus packages."
The finance ministers were meeting in Wroclaw, Poland, against a backdrop of intensifying market alarm over the future of the single currency. Mr Juncker also announced during the meeting that the Euro Group's decision on whether to release the next €8bn (£7bn) tranche of bail-out funding for Greece would not be taken until the next meeting on 3 October. The funds will be released only if Athens demonstrates progress in bringing down its budget deficit.
Earlier in the day, the US Treasury Secretary, Timothy Geithner, who was attending the meeting as an observer, urged European politicians to avoid "loose talk" about dismantling the institutions of the euro, talk which has alarmed financial markets on both sides of the Atlantic. Mr Geithner also suggested that ministers should consider dramatically extending the lending power of the €440bn European Financial Stability Facility (EFSF), set up to assist eurozone governments that are shut out by the lending markets.
But comments from the Austrian finance minister, Maria Fekter, suggested that Mr Geithner's advice was not well received. She told reporters: "I found it peculiar that, even though the Americans have significantly worse fundamental data [on public debt] than the eurozone, they tell us what we should do." Mr Juncker was also dismissive of Mr Geithner's proposal, saying: "We are not discussing the expansion or increase of the EFSF with a non-member of the euro area."
The parliaments of Spain and Luxembourg ratified an extension of powers for the EFSF this week, bringing the number of eurozone nations that have done so to five. Italy, France and Belgium have also ratified. Germany will vote on the package on 29 September.
Rumours of a credit-rating downgrade weighed on Italian bank shares, causing the Milan market to miss out on the stock market rally prompted by central banks' promise this week to provide dollar loans.Reuse content