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Spain, Greece wait as eurozone to open up ESM rescue fund

BRUSSELS -- The eurozone finally gets its 500-billion-euro rescue fund on Monday when finance ministers meet amid growing uncertainty over Greece's tortuous debt bailout and whether Spain will need help in turn.

The formal launch and inaugural board meeting of the European Stability Mechanism comes just 10 days before the EU's 27 leaders hold a Brussels summit, with expectations low that there will be any breakthrough on the big issues.

Greece will not get the green light, either in Luxembourg or at the Oct. 18-19 meeting, for the resumption of its drip-feed bailout after differences with its EU, European Central Bank and International Monetary Fund creditors.

EU-IMF-ECB officials have been locked in discussions with Athens over the need for more austerity measures while Greece insists it has done as much as it can and now needs more time to meet the troika's targets.

Greek Prime Minister Antonis Samaras said Friday the country could not take more austerity and if its next aid tranche worth 31.5 billion euros (US$40.6 billion) did not arrive soon, then by November state coffers would be empty.

The October summit comes “considerably too early” to resolve the issues, a senior eurozone official said, given competing demands from the IMF, a newly public alliance of eurozone hard-liners Germany, the Netherlands and Finland, and Greek leaders from opposite ends of the political spectrum.

Germany, the Netherlands and Finland last week appeared to put in doubt key commitments made at a June summit, which notably agreed that the ESM would be able to recapitalize banks directly once a single banking supervisor is put in place, hopefully by the end of the year.

The three argued that the ESM should not be used to help those banks already bailed out before it became operational, a potentially heavy blow for the likes of Ireland which went bust after trying to keep its lenders afloat, and for Spain which has also recapitalized some of its banks and secured 100 billion euros from its eurozone partners to do more.

Another EU official said this stand on “legacy assets” must have been “very unwelcome” for Spain and bailed-out Ireland.

Conceding that there was some room for differences on the issue, the official said, nonetheless, that “we would expect the conclusions of the European Council (June summit) to be adhered to.”

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