Opinion     

Five highlights expected at EU Summit

People's Daily, October 25, 2011

• 3) How to make the EFSF work?

  After the Slovakian parliament approved the expansion proposal for the European Financial Stability Facility (EFSF), the 17 member countries in the euro zone finally reached an agreement. The positive significance of such agreement is not to be belittled, but a lot unsettled problems are not to be overlooked either. The next summit needs to resolve the differences still existing between Germany and France on what conditions prompt the use of the EFSF to save E.U. banking, purchase the sovereign debts of countries in the euro zone or provide precautionary credit. Another problem awaiting solution is that whether the EFSF, which has a 440-billion-euros credit scale, should be leveraged to provide security for the trust fund while expanding the scale of capital funds in circulation.

  4) Will the ESM come into play ahead of schedule?

  The European Stability Mechanism (ESM) was scheduled to be launched in 2013 as a permanent rescue funding program to succeed the temporary EFSF, but due to the deepening European debt crisis, European Commission President Jose Manuel Barroso recently called for the ESM to come into force in the first half of 2012, which has gained the approval of major euro zone countries. Market sentiment will be greatly improved if Barroso’s proposal is passed at the European Union summit.

  5) Possible establishment of a euro zone government

  The systemic flaws of the euro zone exposed during the European debt crisis can no longer be overlooked. Germany and France, whose frequent talks right before the first European Union summit in July this year contributed much to the success of the summit, will remain crucial to another summit. Germany and France are showing greater interest in exchanging views, and investors hope that the two countries can again bring good news for the market. However, the German government has warned that the E.U. summit may not solve all problems plaguing Europe.

   

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