The euro zone’s financial rescue fund seems set to win parliamentary approval by mid-October for expanded powers to help member states in difficulty despite mounting hostility in northern Europe towards further bailouts. A Reuters survey suggests new rules allowing the European Financial Stability Facility to buy bonds on the secondary market and give precautionary credit lines to countries before they are shut out of credit markets face few obstacles in national legislatures with vocal Eurosceptical minorities.
Goverments in Germany, Austria, Finland, the Netherlands and Slovakia say they are confident their parliaments will approve a July 21 agreement by euro zone leaders to widen the scope of the 440-billion-euro EFSF when they resume business in the coming weeks.
The main political risk to approval is if debate takes place amid new demands from European officials to increase the size of the bailout fund, or to take more radical steps such as issuing joint euro zone bonds, government sources say.
A European Central Bank policymaker voiced concern on Tuesday at the slow pace of implementation of the summit decisions, saying it was unsettling investors. “At the moment we are seeing large delays here, and of course then great uncertainty on the markets,” Ewald Nowotny of Austria said in a radio interview. Parliaments and markets function to different timelines. Most legislatures are in summer recess until next month and governments have chosen not to recall them, perhaps to avoid creating a sense of emergency.
The ECB began buying Italian and Spanish bonds on Monday to try to arrest the euro zone’s widening sovereign debt crisis until the EFSF receives its new powers. German Chancellor Angela Merkel, whose country is the euro zone’s chief paymaster, pledged a joint statement with French President Nicolas Sarkozy on Sunday to obtain parliamentary approval by the end of September.
