Eurozone emergency fund set to launch operations: CEO
A fund providing the eurozone with a debt safety net of 440 billion euros (560 billion dollars) should be in place by the end of July and get a top credit rating, its chief executive said on Wednesday.
The fund might never be used, or could help governments replenish the coffers of any banks which fail so-called stress tests of their ability to face financial market tension, the German chief executive Klaus Regling told the Wall Street Journal and Financial Times.
The Luxembourg-based European Financial Stability Facility (EFSF) is expected to exist for just three years, he added.
"We will be ready to act whenever the politicians tell us to act," Regling told the FT, highlighting political control over the fund.
Governments that call on it would nonetheless be expected to enact reforms drawn up by the International Monetary Fund (IMF), the European Commission and the European Central Bank.
"It does not mean there is an ATM machine," Regling stressed in reference to commercial bank cash dispensers.
"Everyone agrees that countries only get money when they accept conditionality."
The ESFS is part of a total 750 billion euros agreed to by European leaders and the IMF to provide a backstop to countries such as Portugal and Spain which might have trouble raising funds on capital markets owing to rising debt.
Greece already benefits from a separate fund worth 110 billion euros.
"At the moment it is unlikely that any money will be needed," Regling told the Wall Street Journal.
"Markets are improving and the focus is shifting away from Europe," he said.
But some countries "may well decide that a certain share of the money goes to the banking sector," he added, as has already happened in Greece.
The ESFS chief executive stressed that specific measures had been taken to ensure the fund got a AAA credit rating which would allow it to borrow money at the most favourable rates.
They included a build up of a cash reserve and a guarantee by member countries to pay up to 20 percent more than their agreed shares.
"I am confident that we will get the best possible rating, maybe some time in August," Regling said.
© 2010 AFP