FRANKFURT (MNI) – Eurozone Commissioner Olli Rehn said recent
developments in markets showed the importance of getting the amended
version of the European Financial Stability Facility (EFSF) up and
running as quickly as possible.

“We need the amended version of the EFSF quickly,” Rehn said in an
interview with the FT Deutschland. “Without the ratification of
decisions [made at the July 21 summit in Brussels] by national
parliaments, involving the private sector in the second rescue package
for Greece will be difficult.”

Rehn said sorting out the technical details of the programme would
be completed by the beginning of September. The new version, he said,
would be then handed to national parliaments for ratification in
September.

On Sunday, French President Nicolas Sarkozy and German Chancellor
Angela Merkel stressed “the importance that parliamentary approval will
be obtained swiftly by the end of September” in Germany and France.

Turning to Italy, Rehn said economic fundamentals did not justify
recent market reactions. But he stressed the need for Italy to do more
to regain the confidence of the market. He welcomed Rome’s decision to
speed up the pace of budget deficit cuts and to push through structural
reforms.

Rehn also welcomed Italy’s promise to alter its constitution to
create a debt brake along German lines. “The obligation to enshrine a
commitment to balance budgets within sovereign constitutions was part of
the Brussels accord,” he noted.

On Friday, Italian Prime Minister Silvio Berlusconi announced plans
to bring forward fiscal austerity measures. The move is seen as clearing
an important hurdle in allowing the ECB to purchase Italian bonds in the
secondary market.

Asked by the FT Deutschland if there were a risk that slowing
growth could push states such as Spain back into recession, Rehn said
this could be avoided if countries committed to agreed consolidation
programmes.

“Further shocks to the financial system can be avoided through
effective political coordination and the need for hard decisions in
affected states,” Rehn said.

–Frankfurt bureau: +49-30-22 62 05 80; email: frankfurt@marketnews.com

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