Finance ministers discuss changes to bail-out fund

Lending capacity may be enhanced.

The finance ministers from the 17 countries using the European single currency on Monday night (17 January) discussed making changes to the eurozone’s emergency bail-out fund.

The European Commission had last week urged changes to the operation of the €440 billion European Financial Stability Facility (EFSF) to strengthen its lending capacity and widen its remit. Its call was supported by the European Central Bank.

Among the options being discussed are ways to improve the proportion of the fund available for loans. At present, more than half is kept in reserve to ensure the fund’s triple-A credit rating.

There has been speculation that the changes might be approved at the next meeting of the European Council, the leaders of the member states, which is scheduled to be on 4 February.

But Jean-Claude Juncker,  Luxembourg’s prime minister, who chairs meetings of the eurozone finance ministers, Eurogroup, said after tonight’s meeting that he could not give an exact date when the discussions would reach conclusions but that he understood the urgency of the situation.

He said: “We will speed up our work in a way to be able to deliver a total comprehensive report to the European Council as soon as possible.”

Juncker would not reveal the details of the options under discussion, but they are understood to include allowing the fund to buy bonds and changing the level of guarantees so that higher loans can be issued.

He said: “There will be some qualitative tweaking to the EFSF and we are looking at a number of solutions. It’s part of what we have done. We’re discussing the different options but we have not privileged any of those options.”

He added: “There are a range of problems that have to be addressed in relation to the EFSF and the comprehensive response. There are a huge amount of common views. There are slight differences but they are not dramatic and we will be in a position to deliver a comprehensive report as soon as possible.

“We do think we have good reasons to accelerate our work and to speed up the preparation of this comprehensive response.

“I don’t think that we will need months and we will try to be as efficient as possible. If supplementary meetings are needed, these supplementary meetings will take place. But I wouldn’t give a date for conclusion of our work, but the work will be done at the highest speed possible.”

He said he expected conclusions to be ready to be discussed at the summit of EU leaders in March but that a decision could be made before then.

Olli Rehn, the European commissioner for economic and financial affairs, said that ministers had also discussed how the permanent stability mechanism – to replace the EFSF in 2013 – would be formed.

He said: “We will secure an agreement on the future permanent European Stability Mechanism (ESM) by March. The ESM should be sufficiently large to ensure its credibility in the markets and be able to use a variety of instruments.”

Rehn said  that finance ministers also discussed the situation in Greece and Ireland – countries that have requested financial assistance from the EU and International Monetary Fund (IMF).

He said: “We took stock of progress. Everything is on course as was supposed to be and the third tranche [of loans] for Greece is going to be [paid out on] the day after tomorrow, the 19th, as it was supposed to be.
“And the EFSF procedure for Ireland is also going forward in terms of the monies for the loan.”

Juncker said that finance ministers had also discussed the financial situation in Portugal and Spain.

He said: “Markets remain volatile, but related developments were encouraging. The spreads on sovereigns have moved in ways that illustrate this. The measures taken so far seem to be working, particularly those measures taken in Portugal and Spain, because those measures seem to have borne fruit.

“In Spain, ambitious measures have also been taken to cut the deficit and to make the labour market more efficient and to strengthen the banking sector. Spain is really an example of budgetary consolidation in this respect.

“When you talk about the eurozone credibility in the markets, it is no longer a problem for the euro as a zone, and that gives me a lot of faith, bearing in mind some of the other things that others say.”

Click Here: cheap Cowboys jersey