BRUSSELS (MNI) – European Central Bank President Jean-Claude
Trichet on Tuesday once again rejected the idea of leveraging the
European bailout fund EFSF via the ECB.
“We consider that the governments have all the capacity to leverage
themselves the EFSF. We do not consider that it would be appropriate to
leverage ourselves the EFSF,” Trichet said in a parliamentary hearing.
Policymakers are searching for ways to leverage the bailout fund to
give it sufficient firepower. One proposal had been to turn the bailout
fund into an ECB counterparty, allowing it to use its bonds as
collateral to tap into the central bank’s unlimited liquidity supply.
A previous ECB legal opinion had warned that turning the bailout
fund into a central bank counterparty would violate monetary financing
prohibitions, but more recently there had been speculation that the bank
might soften its stance.
Trichet urged governments to “take all necessary measures” to put
an end to the crisis. “We asked them to act responsibly. We are the
epicenter of the global crisis.”
Governments must tackle the sovereign debt crisis and push ahead
with bank recapitalization efforts, Trichet said.
“Supervisors must coordinate efforts to strengthen bank capital,
including having recourse to backstop facilities, and also taking into
account the need for a transparent and consistent valuation of sovereign
exposures,” Trichet said in a statement of the European Systemic Risk
Board.
“The possibility for the European Financial Stability Facility
(EFSF) to lend to governments in order to recapitalize banks, including,
if necessary, in non-programme countries, could be of benefit here,”
Trichet said.
The comment appear to reject ideas of French President Nicolas
Sarkozy, who has called for a pan-European recapitalization approach
that would have the EFSF inject capital directly into ailing banks.
— Frankfurt newsroom: +49-69-720142; email: frankfurt@marketnews.com
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