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New row brewing over bank bailout ahead of Paris summit
Date 14/10/2011 15:07  Author webmaster  Hits 944  Language Global
• 14 OCT 2011

By Simon Duke | Mail Online

France was last night pressing for a vast expansion in Europe’s bailout fund in a move that risks re-opening rifts with Germany over how to tackle the debt crisis.

President Nicolas Sarkozy wants to bolster substantially the €440billion war chest so that it can inject money directly into troubled European lenders.

The enhanced firepower would come from transforming the European Financial Stability Fund into a bank, allowing it to raise capital in its own right, aides to Sarkozy said.

The plan is likely to be opposed by Germany and the European Central Bank, which as the region’s lender of last resort would likely have to stump up the funds.

Both the ECB and German Chancellor Angela Merkel believe that national governments and private investors should shoulder the burden of strengthening their banks, with EFSF cash handed only to crippled institutions.

The brewing row comes as finance ministers and central bankers from the world’s 20 largest economies prepare to meet for a summit in Paris today.

The spectre of an uncontrolled Greek debt default unleashing a tide of panic across financial markets will dominate the proceedings.

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