Brussels, 03/10/2011 (Agence Europe) - Arriving at the Eurogroup meeting on Monday 3 October 2011, EU Economic and Monetary Affairs Commissioner Olli Rehn said that eurozone countries were considering how the EFSF bailout fund might be given more teeth. He said the politicians were examining the options to make the best use of the fund's resources and make it more effective as a safeguard to prevent crises from spreading (see EUROPE 10464). He said one option under investigation was the use of leverage so that the EFSF could lend more than the €440 billion currently planned without having to issue further collateral. The present size of the EFSF is said to be insufficient to bail out bigger countries like Spain and Italy, if necessary.
In an interview with Monday's Die Welt newspaper, the Austrian finance minister, Maria Fekter, said that experts were discussing ways of using leverage and other measures to boost the EFSF's capacity, for example giving the fund access to the ECB's unlimited finance, allowing the EFSF to act as an insurer against losses that an owner of sovereign debt might experience, or guaranteeing bonds bought up by the ECB.
Greece. At the Eurogroup meeting, the ministers will discuss Greece. The international creditors (the European Commission, the ECB and the IMF) are continuing their fact-finding mission in Athens. On Monday morning, the Greek finance minister Evangelos Venizelos presented the latest round of austerity measures to the Greek parliament with a view to helping the country meet its budget commitments for 2012. The measures include a one-off property tax (expected to net nearly €2bn) and cutting the civil service by 20% by 2015. Nearly 30,000 officials, 23,000 of them approaching retirement age, will be placed “in reserve”, whereby they earn 60% of their pay for a year before being made redundant. “Our target is to present, for the first time in many years, a primary surplus of €3.2 billion”, in other words 1.5% of GDP, explains Venizelos in a press release. He said the overshoots in public deficit in 2011 (8.5% rather than 7.5% of GDP) were largely due to a much worse recession than forecast for 2011, 5.5% of GDP rather than 3.8%. For 2012, Greece is expecting a public deficit of 6.8% and public debt of over 160% of GDP. The recession will reduce GDP by 2%, but a return to growth is expected in 2013. Athens hopes the new measures will convince its international creditors to release the next instalment (€8bn) of the first Greek bailout. The markets started the week down in the doldrums due to the lack-lustre economic situation for Greece. (MB/transl.fl)