Euro Gains as Leaders Raise Firewall Limit to 800 Billion Euros

  March 30th, 2012 at 13:46, Miranda Marquit

Multiple euro banknotes and coinsEuro is seeing a boost today as financial ministers in the eurozone agree to raise the firewall meant to contain the spread of sovereign debt crises to 800 billion euros. The move is only temporary, though, and designed to help the eurozone navigate the tricky waters expected over the next year or so. By June 2013, the permanent capacity is supposed to be set at 500 billion euros.

The news is helping the euro, though, by providing a measure of security and proving that eurozone leaders can be proactive in preventing further problems like those seen with Greece. The 800 billion euros represents the combined firepower of the EFSF (a temporary facility) and the ESM (the permanent facility). Once the EFSF stops making new loans, only the ESM will remain, with its 500 billion euro capacity.

Additionally, the new Spanish budget has been presented, and the government has cut 120 billion euros from the budget, instituting a measure of austerity. There are hopes that this will be enough to prevent collapse, and help Spain get back on track — even if the country needs the help of the firewall. For now, the news is good enough to give the euro an edge, though, especially when combined with optimism about the US economy.

At 13:43 GMT EUR/USD is up to 1.3348 from the open at 1.3306. EUR/GBP is up to 0.8343 from the open at 0.8335.

If you have any questions, comments or opinions regarding the Euro, feel free to post them using the commentary form below.

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