Brussels, 12/01/2011 (Agence Europe) - On Wednesday 12 January, the European Commission called for an increase in the funding available in the EFSF fund and for the scope of this intergovernmental fund set up to help the eurozone to be expanded. This announcement came on the same day as Portugal managed to roll over €1.25bn of four and ten-year treasury bonds on the money markets. The Eurogroup will be meeting on Monday 17 January and will necessarily discuss the issue.
Speaking to reporters about the Annual Growth Review carried out by the European Commission (see related article), the president of the European Commission, José Manuel Durão Barroso, said he thought that financial capacity needed to be boosted and the scope of the EFSF fund expanded. He would not go into any detail about the Commission's views because discussion is continuing with the member states, but he hoped that a decision would be taken at the upcoming European Council on Friday 4 February. Asked whether a call for more cash in the EFSF meant that countries other than Ireland would be asking for aid, he simply replied that the European Council had pledged to do all that was necessary to ensure stability in the eurozone. EU Economic and Monetary Affairs Commissioner Olli Rehn said that it was a realistic approach to boost the EFSF and expand its activity rather than introducing the conditions for the joint emission of eurobonds, but said the idea was attractive intellectually.
An intergovernmental fund for the eurozone, the EFSF has public guarantees of €440 billion, but its loan capacity seems in fact to be €250bn in reality, the remainder being used to guarantee loans from the money markets. According to the Wall Street Journal, ideas being looked at include the option of increasing its effective lending capacity to €440 billion and allowing the EFSF to buy up sovereign debt on the markets. This would support the European Central Bank, which is taking action to back Portugal.
The Commission's idea is not to the liking of the two biggest economies in the eurozone. Germany says that any talk at this stage about increasing the EFSF is pointless, explained a spokesperson for German Chancellor Angela Merkel, according to reports on Reuters. The French budget minister, François Baroin, said that the EFSF had enough cash in it at the moment.
On Wednesday, Portugal rolled over €1.25bn of its sovereign debt. The interest rate over ten years was slightly lower than for a similar batch of lending in November (6.7% rather than 6.8%). The rate for four years was higher, however, at 5.4% (compared with 4%). The Portuguese prime minister, José Sócrates, said that Portugal will not be needing any foreign aid to roll over its debt. Its national public deficit will be lower in 2010 than the 7.3% of GDP initially forecast. This was welcomed by both Barroso and Rehn. (M.B./transl.fl)