Eurozone rescue fund needs more flexibility: Bank of France

26th January 2011, Comments 0 comments

The European debt rescue fund should be given the flexibility to buy eurozone sovereign bonds, French Central Bank chief Christian Noyer told the Wall Street Journal Wednesday.

Such a move "would probably be useful in certain cases," as an extra tool in the armoury of the European Financial Stability Facility (EFSF), the bank chief said.

The EFSF was established last June to help heavily-indebted eurozone members after Greece had to seek help to avoid a default that many feared would have sunk the whole euro project.

Ireland was forced into a similar appeal for help late last year after the financial markets turned against it, preventing Dublin from raising fresh funds at sustainable interest rates.

The EFSF on Tuesday sold five-year bonds worth five billion euros ($9.2 billion) in a landmark issue to raise funds for Ireland but so far the ability to buy up sovereign debt has remained in the hands of the European Central Bank.

"Another possibility would be the kind of preventative programmes (such as lines of credit) which the International Monetary Fund provides," Noyer added.

The idea of allowing the EFSF to buy bonds directly has been mooted for some time as a possible way of improving its effectiveness but the issue remains highly controversial.

© 2011 AFP

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