Germany, however, is apparently opposed to a move which would provide profligate countries in Southern Europe with “a hammock made of German taxpayers’ money.” German Chancellor Angela Merkel knows that if she backs the idea of eurobonds she risks political upheaval at home. While the Socialists in the South, and especially the new French President François Hollande, insist on wealth-distribution from the North to the South, the German people do not want it.
Merkel, meanwhile, is pressuring Spanish Prime Minister Mariano Rajoy to ask for emergency funds from the eurozone’s temporary rescue fund EFSF. Spain is currently borrowing money on the international money markets at a 10-year interest of 6.7%. The eurozone countries are also putting together a permanent rescue fund, the European Stability Mechanism (ESM), with a capitalization of €80 billion.
It is doubtful, however, whether this will be sufficient. Spain not only needs €90 billion to save its banks; it also needs to bail out its regional governments, which have to refinance €36 billion in debts later this year. Further, Spain is not even the worst of the EU’s worries. Italy needs to refinance €200 billion later this year, while no one knows where to find that amount if the Germans refuse to foot the bill. Given such a hopeless financial situation, Europe’s politicians are preparing for political turmoil. But others seem well aware of the opportunities Europe’s problems might offer them. The Kremlin will not miss this chance. Already last year, Russian Deputy Prime Minister Arkady Dvorkovich said that Russia is ready to lend money and expertise to solve the eurocrisis. He offered “to both advise and also to contribute to the stability with our own financial reserves.” Last January, Dvorkovich said that “The survival of the euro is a pre-eminent concern for Russia;” last month he stated that Russia wants “Greece to stay in the eurozone.”
Russia undoubtedly has strategic interests when offering financial support to debt-ridden Europe. Many will lose through the eurocrisis, but Russia will not be among them. So far, Brussels has not turned to Moscow for help — yet. But if the situation deteriorates, that soon might be the case.
Originally published by Gatestone Institute http://www.gatestoneinstitute.orgPeter Martino
About the Author: Peter Martino is a European affairs columnist for the Gatestone Institute.
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