Trichet Calls Sanctions Insufficient After Being Weakened

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Cracks remained in the euro zone's package of debt-crisis measures, even as the European Union's finance ministers approved new legislation that sets fresh sanctions for budget offenders and puts new focus on broader economic problems that have destabilized weaker countries.

Jean-Claude Trichet, the president of the European Central Bank, told finance ministers meeting here that the changes to the sanction regime are "insufficient." They still must be debated and approved by the European Parliament, which is likely to try to toughen them.

The rules stem from last year's proposals by the European Commission, the EU's executive arm. To Mr. Trichet's dismay, they were weakened by national leaders. Mr. Trichet has said he wants sanctions that apply more automatically to countries that have fiscal problems; the version approved by finance ministers allows for some intervention by politicians.

Also Tuesday, a roadblock appeared in promised plans to enlarge the size of the euro zone's main bailout fund, and Greece conceded that it might have to seek more help.

The bonds of Greece, Ireland and Portugal all weakened Tuesday compared with benchmark German securities, giving back some of Monday's gains. Their prospects had appeared brighter after a deal on a broad package of measures was reached by national leaders early Saturday.

But that deal leaves many details unresolved. The holdup on the bailout fund comes from Finland, one of the six euro-zone countries with a triple-A credit rating. The bailout fund, called the European Financial Stability Facility, currently operates with a set of loan guarantees from 15 of the 17 euro-zone nations. (Ireland and Greece, both recipients of bailouts, are excused.)

But because European policy makers insist that the bailout fund itself should have a triple-A rating, the guarantees of the less-well-appraised countries count for very little. One proposal to enlarge the fund involves raising the size of the guarantees; that burden would fall largely on the shoulders of Finland and the other five with sterling credit.

Finland expressed opposition at the meeting Tuesday, and a person familiar with the matter said Finnish Finance Minister Jyrki Katainen wants to avoid any specific agreement on raising the guarantees until after Finnish elections in mid-April. Mr. Katainen, who is expected to become prime minister if his center-right party prevails, is fighting off a challenge from a right-wing party skeptical of assistance to other EU countries.

The situation is complicated by national procedures: Finland's parliament dissolved Tuesday ahead of the elections, and an emergency session would be required to authorize a deal on the bailout fund.

Also Tuesday, Greek's finance minister, George Papaconstantinou, said his country might need more aid beyond the €110 billion ($154 billion) bailout granted last year. Under terms, Greece is expected to begin issuing long-term bonds in 2012 to supplement that aid; without that market financing, Greece won't be able plug its budget gap and repay debt.

Separately, Moody's Investors Service issued a two-notch downgrade on Portugal's long-term government bond ratings, citing subdued growth prospects and productivity gains over the near term until structural reforms are enacted.

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