The euro zone‘s trillion dollar bailout are likely to be subject to a criminal investigation, the EUobserver.com reports. Several member of the European Parliament are questioning the way in which E.U. leaders and finance minsters rapidly cobbled together a €750 billion euro zone rescue mechanism at the beginning of last month, referring to the process as “highly undemocratic”.
“This is something that we are going to follow up.”
Comments made by the influential center-right MEP Wolf Klinz on Thursday, refer in particular to the new balance-of-payments facility for euro zone states that makes up part of the support mechanism. “This is something that we are going to follow up,” Mr Klinz said when asked whether parliament should have been consulted beforehand.
Wolf Klinz from Germany is also chairman of the E.U. parliament’s special committee on the financial crisis.
“It’s the first step towards euro-bonds,” Wolf Klinz adds.
“Personally I am against euro-bonds to finance member-state debts.”
Under the facility, the European Commission can raise up to €60 billion on capital markets and then lend the money to euro-area states that are struggling to meet their debt obligations.
Others have also questioned the legitimacy of the new tool, under which the commission can raise money at low interest rates by issuing bonds, backed by the bloc’s roughly €140 billion annual budget.
Presented With Doomsday Scenario
“We are facing such exceptional circumstance today and the mechanism will stay in place as long as needed to safeguard financial stability,” finance ministers said last month in justifying their decision.
The other components of the euro area rescue mechanism include €440 billion in government-backed loan guarantees and bilateral loans on an intergovernmental basis, and €250 billion in IMF money.
Sources say EU leaders meeting in Brussels on the fateful Friday, 7 May, were presented with a doomsday scenario, with analysts predicting skyrocketing borrowing rates for several peripheral euro zone states the following week.
As part of the resulting deal to protect these states and the euro zone as a whole, the European Central Bank was also forced to throw standard practices out the window as policy makers rushed to agree measures before markets opened on Monday morning.
The bank’s decision to commence sovereign bond purchases on the secondary market was previously seen as strictly taboo.
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