FRANKFURT (MNI) – The European Central Bank supports enlarging both
the size and the scope of the Eurozone’s EFSF bailout fund, ECB
President Jean-Claude Trichet said Monday.

“We are calling for the maximum flexibility and I would say maximum
capacity quantitatively and qualitatively,” Trichet told economic
journalists here when asked whether the ECB would support the bailout
fund buying peripheral government bonds.

Earlier Monday, the Financial Times, citing people involved in the
deliberations, said that European officials are considering plans to
overhaul the E440-billion fund to allow it to purchase government debt.

The ECB’s position stands in contrast to that of the German and
French governments, which have indicated that they are not prepared to
step up funding or expand the funds responsibilities at the current
juncture.

On the issue of Eurozone bonds, the central bank is more in sync
with the region’s two largest economies. Trichet hinted that the central
bank does not favor the common underwriting of debt.

“In previous periods, the ECB had said it was not necessarily
appropriate to have such kind of bonds. We were very clear on that” as
they remove incentives to keep finances under control, Trichet said. “At
this stage, I already said that there was no new position of the
Governing Council of the ECB on any new proposal.”

Probed as to whether the ECB might be considering or even planning
a capital hike to hedge against potential substantial losses on the back
of its own bond buys, he said: “I have no particular comment on that.”

Trichet also stressed that the ECB is “extraordinarily attached” to
sterilizing all bond purchases, underlining that the central bank is
“carefully avoiding” any consequence for the monetary policy stance.

Trichet called on Eurozone governments to stop their public
squabbles over various crisis-fighting mechanisms, given the very tense
situation on markets. At the same time, he said he expected European
leaders to take the necessary measures to keep the Eurozone together.

“Each of us have to be up to our own responsibility,” he said,
adding that in times of crisis Europeans had always proven their ability
to act. “European unity is more justified today than ever…My
understanding is that European governments are aware of this.”

— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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