By Gregory Viscusi and Josiane Kremer
Nov. 30 (Bloomberg) -- Euro-area finance
ministers approved enhancements to their bailout fund while backing off
setting a target for how much firepower they plan to muster to stem a
growing debt crisis.
After a series of stop-gap accords failed to
protect Italy and Spain from widening bond yield, the ministers met in
Brussels under growing pressure from U.S. leaders and financial markets
to find ways to boost the European Financial Stability Facility’s
effectiveness. They agreed to create certificates that could guarantee
up to 30 percent of new issues from troubled euro-area governments and
to create investment vehicles that would boost the EFSF’s firepower to
intervene in primary and secondary bond markets.
“It’s impossible to give one number; it’s a
process,” EFSF Chief Executive Officer Klaus Regling told a press
conference in Brussels, backing off an earlier goal of 1 trillion euros
($1.3 trillion). “We will need money if countries make a request, and
market conditions change over time.”
While saying it won’t meet the previously stated
goal, Luxembourg Prime Minister Jean-Claude Juncker said the fund’s
capacity will be “very substantial.”
The bond certificates could be up and running
next month, Regling said, while the investment vehicles could be
operational in January. “Many investors are interested and will
participate if we have solidly commercial product,” Regling said. “But
don’t expect massive inflows immediately. The needs will come over
time.”
IMF Resources
Juncker, who heads the euro group of finance
ministers, also said the euro area will work on boosting the resources
of the International Monetary Fund so that it can “cooperate” more
closely with the EFSF.
“There are some marginal technical changes
regarding intervention in primary and secondary markets, but overall
it’s very similar” to previously published documents on the EFSF’s role,
said Jacques Cailloux, chief European economist at Royal Bank of
Scotland Group Plc in London. “Dec. 9 might have more meat, hopefully,
otherwise markets will be yet again disappointed.”
European heads of government meet Dec. 9 in
Brussels, in a meeting that is likely to be dominated by the debt crisis
that began in Greece two years, spread to Ireland and Portugal, before
driving up Italian and Spanish bond yields over the summer, and now is
hurting even Germany’s ability to sell debt and threatening France’s top
debt rating.
--With assistance from Rebecca Christie, Angeline Benoit, Mark Deen,
Lorenzo Totaro, Jonathan Stearns, Nejra Cehic and Rainer Buergin in
Brussels, Stephanie Bodoni in Luxembourg and Sandrine Rastello in
Washington. Editors: Patrick G. Henry, Jones Hayden
To contact the reporters on this story: Josiane Kremer in Brussels at
jkremer@bloomberg.net;
Gregory Viscusi in Brussels at
gviscusi@bloomberg.net.
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
