Eurozone bailout fund to get more powers: report

4th February 2011, Comments 0 comments

European leaders will approve measures to overhaul the eurozone's 440-billion-euro bailout fund as they battle to control the sovereign debt crisis, the Financial Times reported Friday.

Leaders will agree to expand the European financial stability facility (EFSF), giving it more scope to alleviate the ongoing crisis, according to draft summit conclusions seen by the newspaper.

Germany had been reluctant to expand the EFSF's role and expressed doubt over granting the fund the ability to buy government bonds, a measure designed to prevent liquidity crises.

"Let's be clear: We are not in full agreement with our German friends," said a senior French official. "The essential question is the flexibility of the fund."

The proposals have been debated within the European Union for many months, but leaders will agree to "concrete proposals" by next month, according to conclusions sent by Herman Van Rompuy, the EU president, to member governments.

The EU hopes the measures will give the fund "the flexibility and financial capacity to provide adequate support" for the troubled single European currency.

The draft document, which could be amended when leaders meet at Friday's Brussels summit, does not say how the fund will be overhauled or whether it should be allowed to buy sovereign bonds in the open market.

European leaders are desperate to avoid the debt contagion spreading to Portugal and particularly Spain, although fears for the Spanish economy have subsided over recent weeks.

Germany leader Angela Merkel praised the Mediterranean country's debt-fighting efforts during a meeting with Jose Luis Rodriguez Zapatero, the Spanish prime minister, in Madrid.

"Spain has done great things and succeeded with reforms to put the country on a much more positive path," Merkel said.

© 2011 AFP

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