LUXEMBOURG (MNI) – Eurozone finance ministers are mulling options
to boost the fireopower of the currency union’s bailout fund without
calling on governments to commit more cash or relying heavily on the
European Central Bank, Eurogroup head jean-Claude Juncker said early
Tuesday.
“We are considering that in no way should we increase the financial
volume of the recently agreed EFSF framework that has been ratified by
almost all our parliaments,” Juncker said during a press briefing
following the Eurogroup meeting.
At the same time, “it is our common view that we have to increase
as far as feasible the efficiency of the new instruments of the EFSF,”
he added.
EU Economic and Monetary Affairs Commissioner Olli Rehn interjected
a sense of urgency, arguing that the pending reforms decided on July 21
would not boost the fund sufficiently to calm financial markets.
“That will not be enough. We need to use its capital more
effectively and efficiently. We need to optimize the resources of the
EFSF. We need to get more firepower out of the EFSF in order to provide
an effective firewall against contagion and, if necessary, intervene to
support the recapitalization of banks,” Rehn said.
Policymakers did not offer any insights into what particular
leveraging options for the EFSF had been discussed. “It is very much a
work in progress. I hope it will be concluded by the next Eurogroup
meeting,” Juncker said.
However, Juncker indicated that the ECB was unlikely to play a key
role in a possible leveraging mechanism. Asked about potential ECB
involvement, Juncker said: “I don’t think that this will be the main
avenue of our considerations.”
One frequently cited option had been to leverage the fund’s
capacity by turning the EFSF into an ECB counterparty, which would use
its bonds as collateral to borrow from the central bank. The idea has
already been rejected by the Bundesbank and by an ECB legal opinion
suggesting this would breach the Maastricht Treaty.
–pkoh@marketnews.com, jtreeck@marketnews.com
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