'Big bazooka' bailout fund killed off
Europe's so-called "big bazooka" bailout fund was effectively killed off today when the credit ratings agencies delivered a vote of no confidence.
US-based Standard & Poor announced it had put the Triple-A rating of the European Financial Stability Facility (EFSF) under review for a likely downgrade.
It leaves the EU relying on Germany lifting its block on the European Central Bank leading a bailout of indebted countries. However chancellor Angela Merkel is insisting that the eurozone adopts tough new fiscal rules before she will countenance putting the Bank's anti-inflation credentials at risk.
European Commission officials admitted that there were already doubts about whether the EFSF could carry enough market confidence before today's announcement. Under the original plan it would be turned into a fire-fighting fund worth one a trillion euros.
Announcing its review of the ESFS, S&P said in a statement: "Depending on the outcome of our review of the ratings on EFSF member governments, we could lower the long-term rating on the EFSF by one or two notches, if any."
European leaders are gathering on Thursday and Friday for a summit where options to deal with the crisis will be floated. Germany is pressing for a new treaty.
A financial transaction tax, which the City says would undermine London and other European centres of finance, is being pressed by the Commission. However officials are annoyed by claims voiced in Britain that it is anti-British.
"The Commission has repeatedly said it wants to see strong financial centres in Europe, including the City of London," said one. Commission sources were infuriated by yesterday's Open Europe report that claimed evidence that other EU states were already ganging up to undermine London with red tape.
