France retreated from a clash with Germany over how to expand the power of Europe’s bailout fund as finance ministers entered the second of a six-day marathon to stave off a Greek default and shield banks from the fallout.
The French proposal that the fund, the European Financial Stability Facility, should get a banking license enabling it to borrow from the European Central Bank “is no longer an option,” Dutch Finance Minister Jan Kees de Jager told reporters today in Brussels. He said two options were under consideration, declining to discuss them further. Still, there are “big differences” among countries, he said.
The French flexibility indicated progress toward easing the threat to the global economy stemming from Greece. As they began their consultations yesterday, the euro-area finance chiefs received an assessment from auditors that Greek finances have taken a “turn for the worse,” requiring more official aid and deeper investor writedowns.
Stocks and the euro rallied on signs that policy makers may heed prodding from global leaders including President Barack Obama to calm global markets. Officials are also considering unleashing as much as 940 billion euros ($1.3 trillion) to fight the debt crisis, almost double the current ceiling, by combining the 440 billion-euro EFSF and its planned successor, the European Stability Mechanism.