BERLIN (MNI) – A senior German government official on Friday cited
the so-called insurance solution and a stronger involvement of the IMF
as the two most promising proposals being discussed on the European
level to increase the firing power of the European Financial Stability
Facility (EFSF).

The insurance concept foresees that the EFSF would guarantee a
certain percentage of a bond in order to minimize the risk for private
investors, he explained.

Regarding a stronger IMF involvement, fiscally ailing Eurozone
member states could apply for precautionary financial aid not only at
the EFSF but parallel at the IMF, the official said.

“The IMF [involvement] and insurance [model] are for me currently
the two options which have the largest chances of success,” he said.

European leaders at their summit in Brussels on Sunday will discuss
these matters but any decisions will be made only at a follow-up summit
on Wednesday, German government spokesman Steffen Seibert said at a
regular government press conference earlier today.

Seibert reaffirmed that Germany strictly opposes a bank licence for
the EFSF.

The German government source stressed, though, that there do not
exist fundamental differences between Germany and France on the matter.

Rather, “there exists a great agreement with France,” the official
said. “It is not correct that there exist fundamental differences
between Germany and France which have made it necessary” to delay any
decisions to a second summit on Wednesday, he stressed.

“It was the slow progress of technical preparations and not
difficulties to get an agreement between Germany and France” which
caused the delay of the decision-making process, the source said.

Eurozone finance ministers, though, will likely already come to an
agreement at their meeting on Saturday on how to recapitalize banks in
the Eurozone, the official said.

Regarding Greece, the source said Germany favored a more permanent
monitoring of the implementation of the required consolidation and
reform measures under the EU-IMF program for the country. An evaluation
every three month by the troika of IMF, ECB and EU Commission is not
enough, he argued. Rather, any slippages of the implementation process
need to be countered right away, he said.

Germany wants to see Greece reducing its total debt to 120% of GDP
by 2020, he said. Any decisions on a second aid program for Greece must
orientate themselves on that goal, he said.

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

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