EN EL OJO DEL HURACAN

La cara de la crisis de la eurozona

EconoMonitor : RGE Analysts » Eurozone Crisis: In the Eye of the Storm

"But for the firewall to work both its EU and IMF elements must be large enough. This is far from guaranteed, and failure on this point could trigger a massive escalation of the crisis. On the EU side of the firewall, there are currently two funds in place, the European Financial Stability Facility (EFSF), which has around 250 billion euros in available funding, and the 500 billion euro European Stability Mechanism (ESM). The former is due to replace the ESM in June 2012, but the only way to amass enough funds to cover Italy and Spain’s financing needs for a few years is to run the EFSF and ESM concurrently. However, German Chancellor Angela Merkel remains — for now, at least — vehemently opposed to this idea. Similarly on the IMF side, many countries have indicated their reluctance to contribute to a firewall until the Eurozone devotes more of its own collective resources to solving its crisis.

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Figure 2: Composition of the Firewall vs. Financing Costs for the PIIGS (€, billions)"

Source: EFSF, ESM, RGE estimates* We assume that Italy and Spain will not be forced to request official financing before 2013