BRUSSELS (MNI) – EU officials are considering increasing the
firepower of the European Financial Stability Facility (EFSF), the
Eurozone’s emergency bailout fund, to fight the spread of the sovereign
debt crisis, European Commission officials confirmed on Monday.
“An increase in funding for the EFSF is an issue being considered
and discussed,” but “no formal decision has been taken,” a spokesman for
the Commission said at a regular press briefing.
The European Commission “has always said we would like to reinforce
the EFSF through its uses and actual amounts,” the spokesman pointed
out. EU Commissioner for Economic and Monetary Affairs, Olli Rehn, said
in Washington DC over the weekend that “further leveraging” of the EFSF
could be useful.
Last Friday EU finance Officials told Market News International
that options to enhance the strength of the fund, including the use of
leverage through transactions with the European Central Bank, could be
discussed by Eurozone finance ministers as soon as next week, when they
meet in Luxembourg.
The spokesman declined to confirm reports in the press about the
scale of leverage that was being considered.
EU leaders already agreed earlier this year to increase the lending
capacity of the EFSF to E440 billion. That change is expected to be
voted on by national parliaments of Eurozone member states in the coming
weeks, along with proposals to expand the fund’s authority by allowing
it to buy distressed sovereign bonds, recapitalize banks and provide
pre-emptive financing to countries that find themselves in trouble.
Many analysts now think that the planned size of E440 billion will
not be adequate for the EFSF to discharge all of those functions should
the crisis not abate.
However, a German finance ministry spokesman said earlier today
that in Germany’s view the EFSF did not require another increase.
–Brussels Newsroom +324-9522-8374; pkoh@marketnews.com
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