Euro Shows Little Change from Monday
The euro traded at 1.2964 Tuesday morning and showed little change from Monday's prices. Investor confidence in the region's currency remained hopeful but cautious as Europe's finance ministers met in Luxembourg on Monday to discuss steps to take in curbing the financial crisis.
The meeting resulted in the announcement of the European Stability Mechanism; a collective fund that will have 500 billion euros to lend in times of financial trouble. For now, the fund will coincide with the already existing European Financial Stability Facility, but will eventually replace it. Countries are scheduled to make their first payments to the fund this week with Germany making the largest contribution, almost 27 percent of its total value.
Many have considered the fund a step forward for the eurozone. The BBC reported that supporters consider the new fund to be a sort of “firewall” or “toolbox” to help struggling economies.
While many are positive, there is no lack of criticism. Opponents say the fund isn't large enough to make a sizeable impact on problems within the region. Fears that Italy will need to borrow from the fund along with Spain means the fund will run out within the next three years.
However, this may not be an issue, as a bailout request from Spain seems to be falling to the back burner. German Finance Minister Wolfgang Schaeuble was quoted in Reuters saying that the region, specifically Madrid, did not require additional aid. Schaeuble's view was that Spain has a banking problem, and since the country has already been granted nearly 100 billion euros for this sector, it will not require a sovereign bailout. This news puts a bit of downward pressure on the euro, as many were hoping a Spanish bailout would be the next steps for the region.
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Tags: Wolfgang Schaeuble