Brussels, 29/11/2011 (Agence Europe) - Eurozone finance ministers are still in disagreement about scaling up the EFSF bailout fund. Arriving in Brussels on Tuesday 29 November for a Eurogroup meeting, the French economy minister François Baroin, said there was a good chance of creating a leverage effect so that the EFSF could have €1 trillion to lend out, as decided by the eurozone summit on 26-27 October (see EUROPE 10483). The Spanish finance minister, Elena Salgado, said the eurozone had to try and make the EFSF as big as possible.
Other ministers no longer believe that is do-able. “It will be very difficult to reach, in view of the changed market circumstances, the initially envisaged leverage goal”, said Luxembourg's finance minister Luc Frieden, adding: “The EFSF alone will not be able to solve all the problems.” His Dutch counterpart, Jan Kees de Jager, shares this view, saying it would be necessary to await the outcome of talks about using private investment to create a leverage effect but said that the EFSF's lending capacity would probably be increased two or two-and-a-half fold and this would not raise enough cash to contain the debt crisis in key eurozone nations like Spain and Italy.
Backed by national guarantees, the European Financial Stability Fund currently has a lending capacity of €440 billion, but only €250bn of it is left because the EFSF has already bailed out Ireland, Portugal and (shortly) Greece. On Germany's insistence, the eurozone summit last month considered two ways of boosting the coffers - providing guarantees to investors buying up the bonds of struggling countries, and creating a co-investment facility for cash-rich, non-EU countries under the aegis of the International Monetary Fund. France, backed by southern European countries, wants the EFSF to be allowed to act as a bank and act as lender of last resort, backed by the ECB.
The EFSF managing director, Klaus Regling, is due to report back on the practicalities of the two options by the end of the year. On Monday, he expressed pessimism to German MPs about achieving the eurozone's target because of the deterioration in market conditions. (MB/transl.fl)