BRUSSELS, Belgium– The European Union and the International Monetary Fund pledged a massive nearly $1 trillion defense package for the embattled euro today, hoping to finally turn back relentless attacks on the eurozone’s weakest members and allow the continent to resume its hesitant economic recovery.
Under the three-year aid plan, the EU Commission will make $75 billion available while countries from the 16-nation eurozone would promise bilateral backing for $570 billion. The IMF would contribute an additional sum of at least half of the EU’s total contribution, Spanish Finance Minister Elena Salgado said.
“We shall defend the euro whatever it takes,” EU Commissioner Olli Rehn said after an 11 hour-meeting of EU finance ministers. The meeting capped a hectic week of chaotic sparring between panicked European governments and aggressive markets.
The massive sums come after a week of political posturing and soothing words by eurozone leaders that had no impact on global investors. In the end, even longtime skeptic Germany realized Europe had to show the money after financial attacks on Greece’s debt seemed poised to spread to Portugal and Spain.
“We are placing considerable sums in the interest of stability in Europe,” Salgado said after the meeting.
The talks were called on Friday night after a eurozone summit in Brussels amid concerns that the financial crisis sparked by Greece’s runaway debt problems had begun to spread to other financially troubled eurozone countries such as Portugal and Spain.
“We are facing such exceptional circumstances today and the mechanism will stay in place as long as needed to safeguard financial stability,” the ministers said in a statement.
Spain and Portugal, which have begun to see the same signs of trouble that Greece had three months ago, have committed to “take significant additional consolidation measures in 2010 and 2011,” the statement said, and the two countries will present them to the EU’s finance ministers at their meeting on May 18.
The EU’s slow response to the crisis and its failure to keep Greece from reaching the brink of bankruptcy triggered slides in the euro and global stocks last week. Early Saturday, the eurozone leaders gave final approval for a $100 billion rescue package of loans to Greece for the next three years to keep it from imploding. The IMF also approved its part of the rescue package – $40 billion worth of loans – in Washington on Sunday.