Ministers of Economy and Finance in the euro zone met yesterday in Copenhagen and resorted to some creative accounting so it could come to the 700 billion euros of bailout money that it will use if Spain or Italy need it. In reality, only 500 billion euros are available, because the other 200 billion have been either promised or given to the three European countries that already turned to the EU for aid: Greece, Ireland and Portugal.
There is another 240 billion euros that could be mobilized if another emergency situation arises between now and the middle of next year, but only if the EU could reach a unanimous agreement. This amount only guarantees that it is possible to deploy 500 billion euros now with expectations that that funding goes toward operation costs. This is not the first time that European leaders have tangled themselves in byzantine debates on recovery funds and figures that depart from economic reality.
In the spring of 2010 leaders unveiled a 750-billion euro recovery fund designed to deter speculators from betting against Spain going bankrupt. But the device was designed so poorly that that ultimately only half the funding was mobilized and it had to be reinforced last year.
700 billion euros is significant because translated into United States currency it equals roughly a trillion dollars. And the Organization for Economic Cooperation and Development has indicated that exactly one trillion dollars are needed in order to quiet the markets.
The IMF's contribution
The exact amount of the recovery fund could increase by mid-April if European leaders succeed in getting the IMF to agree to the amount that it will contribute by that time.
