BRUSSELS - The euro zone is likely to agree on details of bolstering its bailout fund next week, and the reformed European Financial Stability Facility should be operational by the summer, euro zone officials said on Tuesday.
Euro zone leaders agreed on Saturday that the capacity of the European Financial Stability Facility should be raised to its full 440 billion euros from the current 250 billion, but left it up to finance ministers to work out how.
They also said the EFSF should lend money to distressed sovereigns more cheaply and be able to participate in their bond auctions if the governments agree to reforms.
The same parameters are to aplly to the European Stability Mechanism (ESM) the permanent bailout fund that is to replace the EFSF from mid-2013.
Euro zone finance ministers discussed the technical details of implementing these changes on Monday and will continue discussions on March 21 to prepare proposals for the acceptance of the next EU summit on March 24-25.
"The conclusions drawn (by the leaders)... and the work conducted in the Eurogroup and the extended eurogroup yesterday evening will allow us to complete our work in time for the European Council next week," Economic and Monetary Affairs Commissioner Olli Rehn told a news conference.
"Following the political agreement, the leader agreement on the ESM and the amendments to the EFSF, legal agreements should be prepared swiftly so as to allow national procedures to be completed on both agreement at the same time by the summer."
The ministers did not reach a deal on how to boost the capacity of the EFSF on Monday because there was not enough time to prepare decisions since the small hours of Saturday morning, one euro zone source said.
The options are either that all euro zone countries raise guarantees for the fund, or that euro zone countries with ratings below AAA would also inject some cash -- the latter being favoured by Germany.
German Finance Minister Wolfgang Schaeuble appeared to cede some ground on Tuesday.
"The 440 billion euros will be made available and they will be available as long as the EFSF exists. Largely, we will have to increase the guarantees," he told reporters.
"Whether we will also add other elements ... remains to be seen," he said on the sidelines of a meeting of European Union finance ministers.
The EFSF's effective capacity is lower than the fund's nominal value because not all euro zone countries providing guarantees have a triple-A credit rating. Cash buffers and other restrictions have been imposed to maintain its top credit status, limiting its deployable capital.
On the ESM, Schaeuble said some details still had to be clarified to ensure it, too, retains a triple-A debt rating.
"We will pay in a part in capital, a part in callable capital and use guarantees. Particulars still have to be cleared up with the rating agencies so we have AAA," he said.
But six EU countries believe that the current formula for calculating the capital each should inject into the ESM was unfair to poorer EU members and seek changes.
Source: www.reuters.com
Euro zone leaders agreed on Saturday that the capacity of the European Financial Stability Facility should be raised to its full 440 billion euros from the current 250 billion, but left it up to finance ministers to work out how.
They also said the EFSF should lend money to distressed sovereigns more cheaply and be able to participate in their bond auctions if the governments agree to reforms.
The same parameters are to aplly to the European Stability Mechanism (ESM) the permanent bailout fund that is to replace the EFSF from mid-2013.
Euro zone finance ministers discussed the technical details of implementing these changes on Monday and will continue discussions on March 21 to prepare proposals for the acceptance of the next EU summit on March 24-25.
"The conclusions drawn (by the leaders)... and the work conducted in the Eurogroup and the extended eurogroup yesterday evening will allow us to complete our work in time for the European Council next week," Economic and Monetary Affairs Commissioner Olli Rehn told a news conference.
"Following the political agreement, the leader agreement on the ESM and the amendments to the EFSF, legal agreements should be prepared swiftly so as to allow national procedures to be completed on both agreement at the same time by the summer."
The ministers did not reach a deal on how to boost the capacity of the EFSF on Monday because there was not enough time to prepare decisions since the small hours of Saturday morning, one euro zone source said.
The options are either that all euro zone countries raise guarantees for the fund, or that euro zone countries with ratings below AAA would also inject some cash -- the latter being favoured by Germany.
German Finance Minister Wolfgang Schaeuble appeared to cede some ground on Tuesday.
"The 440 billion euros will be made available and they will be available as long as the EFSF exists. Largely, we will have to increase the guarantees," he told reporters.
"Whether we will also add other elements ... remains to be seen," he said on the sidelines of a meeting of European Union finance ministers.
The EFSF's effective capacity is lower than the fund's nominal value because not all euro zone countries providing guarantees have a triple-A credit rating. Cash buffers and other restrictions have been imposed to maintain its top credit status, limiting its deployable capital.
On the ESM, Schaeuble said some details still had to be clarified to ensure it, too, retains a triple-A debt rating.
"We will pay in a part in capital, a part in callable capital and use guarantees. Particulars still have to be cleared up with the rating agencies so we have AAA," he said.
But six EU countries believe that the current formula for calculating the capital each should inject into the ESM was unfair to poorer EU members and seek changes.
Source: www.reuters.com
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