Malta guarantees €350m as part of massive euro support fund

Malta will guarantee €350 million as part of a massive €750 billion euro stabilisation fund agreed yesterday between the EU and the IMF.

The fund provides for guarantees of €500 billion by EU countries, with the rest being met by the IMF.

Finance Minister Tonio Fenech stressed at a press conference this afternoon that these were only guarantees, meant to be used as a last resort to safeguard the euro should the current problem facing Greece spread to other countries, weakening the common currency.

These guarantees, Mr Fenech said, were separate from the €74 million which Malta would lend Greece as part of eurozone assistance to that country. Malta has to lend an initial €27 million to Greece this month.

Mr Fenech said that Malta would ultimately profit from this lending since these funds were being borrowed at a lower interest rate than charged from Greece.

The stabilisation fund saw the euro surge today in both Asian and European markets.

The European Central Bank said it will implement exceptional measures in support of the bailout package, including "interventions in the euro area public and private debt securities markets."

Markets last week saw a sell-off amid uncertainty over whether Greece could implement deeply unpopular austerity measures and stave off bankruptcy.

Fears that a possible debt default by Greece could hit the world's financial system in the same way the collapse of Lehman Brothers did two years ago sent shares and the euro plunging.

Concerns had also mounted that the Greek rescue deal will fail to shield Spain and Portugal from crippling market pressures, sending the euro down at one point to 1.2523 in New York, its lowest since March 2009.

However, "given the package, default risks for Spain and Portugal have eased," said Satoru Ogasawara, a forex strategist at Credit Suisse in Tokyo.

But "it is yet to be seen if Greece, Spain or Portugal can reduce fiscal debts. For the euro's (fully-fledged) upturn, the eurozone economy needs to be on a track of sustainable growth."

See also

http://www.timesofmalta.com/articles/view/20100510/local/europes-shock-and-awe-deal-sends-markets-soaring