May 9 (Bloomberg) — European Union finance ministers pledged to stop a sovereign debt crisis from shattering confidence in the euro as they held an emergency summit to hammer out a lending mechanism for deficit-stricken nations.
Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, leaders of the 16 euro nations agreed on the backstop yesterday and told ministers to get it ready before Asian markets open.
“We are going to defend the euro,” Spanish Economy Minister Elena Salgado told reporters as she arrived to chair today’s Brussels meeting. “We think we have a duty for more stability for our currency. We will do whatever is necessary.”
Europe’s failure to contain Greece’s fiscal crisis triggered a 4.3 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.’s collapse. It prompted the U.S. and Asia to urge broader steps to prevent a debt crisis from pitching the world back into a recession.
President Barack Obama spoke by phone with German Chancellor Angela Merkel for the second time in three days, adding to the international pressure Europe has faced since a hurriedly arranged conference call of Group of Seven finance chiefs on May 7. Obama today emphasized “the importance of the members of the European Union taking resolute steps to build confidence in the markets,” White House spokesman Bill Burton told reporters in Hampton, Virginia.
‘Wolfpack Behavior’
“In the night, when the markets are opening, we cannot afford a disappointment,” said Finance Minister Anders Borg of Sweden, one of 11 EU nations not in the euro. “We now see herd behavior in the markets that are really pack behavior, wolfpack behavior.”
European officials declined to disclose the size of the stabilization fund, to be made up of money borrowed by the EU’s central authorities with guarantees by national governments. The meeting started just after 3 p.m. A German official said it will be a “long night.”
Germany, the bloc’s largest economy, will be represented by Interior Minister Thomas de Maiziere after wheelchair- bound Finance Minister Wolfgang Schaeuble, 67, was rushed to a Brussels hospital due to an adverse reaction to new medication.
