Firewall not enough to save Italy or Spain - Fitch
Tuesday 03 April 2012
Fitch Ratings has said that a recent decision to boost the eurozone’s crisis lending ceiling to €700 billion - freeing up €500 billion in new lending from July - will not be enough to match Italy’s and Spain’s funding needs. The decision, reached by finance ministers in Copenhagen, on 30 March, will, however, allow the funds to act as an ‘anchor investor’, providing confidence in eurozone government bond issues and potentially buying up bonds in the secondary markets to maintain prices. “This approach would use EFSF-ESM funds to keep issuers in the debt markets, rather than deploy the funds as an alternative to market funding, making it unnecessary to build a firewall equivalent to the entire gross financing requirement of peripheral countries,” Fitch said in a note, on 3 April, adding that the move is “positive for vulnerable eurozone sovereigns”.