Brussels, 30/11/2011 (Agence Europe) - On Tuesday 29 November, eurozone finance ministers finalised details of the expansion of the EFSF bailout fund in line with the eurozone summit's decisions of 26-27 October (see EUROPE 10483). They decided that there were two options for boosting the fund's lending capacity, which currently stands at €440 billion, without requiring eurozone nations to provide any further financial guarantees, by means of two options, namely using the EFSF to ensure between 20% and 30% of the bonds of struggling countries and/or setting up joint investment vehicles at the IMF for the eurozone which cash-rich non-eurozone nations can invest in. The chair of the Eurogroup, Jean-Claude Juncker, said the two options were not mutually exclusive.
The European Council has set the aim of increasing the lending capacity of the EFSF to €1 trillion, but the EFSF managing director, Klaus Regling, said it was impossible at present to give an exact figure because everything depended on the markets when the fund makes use of its leverage capacity. Whichever option or mixture of options is introduced, countries receiving financial aid will have to abide by strict conditions, he added.
The ministers also looked at other ways of boosting the EFSF's lending capacity to prevent the crisis spreading further in the eurozone: “We also agreed to rapidly explore an increase of the resources of the IMF through bilateral loans, following the mandate from the G20 Cannes summit, so that the IMF could adequately match the new firepower of the EFSF and cooperate even more closely”, said Juncker. EU Commissioner for the Euro Olli Rehn backs this idea.
The EFSF will soon be able to intervene on the short-term debt markets following agreement by the ministers on how it can buy up bonds on the primary and secondary bond and gilt markets. (MB/transl.fl)