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Bowing to the inevitable

By David Gow
Berlin agrees to firewall boost, but falls short of market demands

Ever the pragmatist, Angela Merkel is bowing to the inevitable and has signalled that Germany will lift its opposition to boosting the eurozone’s firewall(s) against sovereign debt contagion. On Friday, in Copenhagen, the eurogroup of finance ministers will formally approve the volume of the new European Stability Mechanism (ESM). That won’t, however, be the end of the crisis.
Today (Tuesday) the OECD has rubbed home that message by forecasting growth of just 0.2% for the zone this year – and called for the firewalls to be strengthened just in case. It says countries with “some fiscal space” can relax budgetary controls but others, such as Spain and Italy, should tighten them if necessary. Hardly surprising then that markets remain labile.
On Monday Merkel confirmed for the first time that the €500bn ESM could “temporarily” sit alongside the existing bailout fund, […]

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