After the announcement of a deal yesterday concerning the ongoing EU debt crisis. There are still details to be filled in on how the EFSF will be leveraged to the one Trillion euros. Germany ruled out the ECB becoming a lender of last resort, and will not add to its contributions.
The EFSF fund will be leveraged to one Trillion euros by gaining the participation of China, Japan, or Gulf states sovereign wealth funds. The EFSF head went to China to get participation in the fund,while President Sarkozy of France contacted President Hu Jinato seeking funds.
Italy has promised to balance its budget and run a surplus in 2013 along with raising its retirement age to 67.
Many Germans oppose the use of the ECB to effectively lend directly to countries via bond purchasing. The Germans want the ECB to stick to its narrow mandate of controlling inflation, a vote will be held in the Bundestag today on the ECB’s role.
At the EU meeting on Sunday with heads of State Silvio Berlusconi was warned to stop the rot in Italy which has seen nearly no growth in ten years.Italy has the third largest bond debt in the world at over 1 trillion euros. The cost of raising funds on the market has skyrocketed with the yield on 10 year bonds surpassing 6%.