European finance ministers today pledged to roll out a bulked-up rescue fund next month, leaving Greece and Italy on the front lines until then in the fight against the debt crisis.
Greece was ordered to provide written acceptance of bailout terms in order to secure the release of an €8 billion loan installment by the end of November, while Italy was pressed to turn budget-cut promises into reality.
The ministers also face pressure to paper over cracks in a plan signed off by EU leaders to inject around €100 billion of extra capital into banks to protect them against the impact of a Greek sovereign default.
Greece's reforms "have to be carried out immediately, we cannot wait until there's a new government, because that could be in March," Austrian finance minister Maria Fekter told reporters today before the second day of a European finance ministers meeting in Brussels. "We need confirmation in writing from all parties."
Europe is battling to regain the upper hand in the debt crisis after political dramas in Greece and Italy provided unexpected distractions and soured international confidence in a package of measures hammered out last month.
European officials are consulting investors and credit- rating companies over two options for translating the rescue fund's €440 billion in guarantees into as much as €1 trillion of spending power.
The first idea is to bring down troubled countries' borrowing costs by issuing "partial protection certificates," a form of insurance for bond sales. One undecided point is whether the certificates would remain attached to the bonds or trade freely.
The second option is to create one or more special investment vehicles that would court outside investment in weaker European states' bonds, potentially from sovereign wealth funds, private investors or cash-rich emerging markets such as China and Russia.
"This isn't a crisis you can solve quickly, it is a monster with many heads," Dutch finance minister Jan Kees de Jager said.
Minister for Finance Michael Noonan said no decision had been taken on a proposed financial transaction tax and that the issue would be returned to in the first half of 2012.
He said Ireland supports such a tax, preferably at the global level or, failing that, in the 27-nation EU, Mr Noonan told reporters in Brussels after the meeting today.
He said there should be a tax on the financial sector as countries all over Europe have support the banking sector and there “must be a day when its payback time for the taxpayer”.
“We would prefer if it could be implemented on a global basis but the chances of that in the short to medium seem to be remote.”
It would be "very onerous" if the tax were imposed in Dublin and not in London, Mr Noonan added.
The transaction tax has been strongly backed by Germany but opposed in equally strong measure by Britain.
"I would suggest that we put to rest the idea that there is going to be some European financial transaction tax," Britain's George Osborne told the finance ministers' meeting.
Mr Noonan told reporters in Brussels after the meeting today. It would be "very onerous" if the tax were imposed in Dublin and not in London, he said.
They also attempted to settle growing discord over a bank recapitalisation framework agreed at last month's EU summit. That was set to cost more than €100 billion, the European Banking Authority (EBA) watchdog predicted, but some countries including Italy now want a more flexible approach to cut this bill.
Swedish finance minister Anders Borg hinted at divisions when he told journalists ahead of today's meeting: "We should do what we have promised. We should stick to those numbers. It should be strongly recognised that any watering down would be costly in terms of credibility.
"We should not change the criteria and we should stick to the accounting rules set out by the EBA." French finance minister Francois Baroin played down any talk of changing the plan. "There is a deal. We have to implement it in its modalities," Mr Baroin said, leaving the meeting. "There is no change on this from our point of view."
Agencies