EU bailout fund won't be bank: EFSF chief

18th October 2011, Comments 0 comments

European officials have dropped the idea of turning Europe's bailout fund, the EFSF, into a bank as a way of boosting its firepower, the daily Handelsblatt reported Tuesday, quoting the fund's head.

Officials are continuing to examine ways of boosting the European Financial Stability Facility, but it will not be given a banking licence, which would have given it access to the funds of the European Central Bank, the newspaper quoted EFSF chief Klaus Regling as saying at an event in Munich.

"The EFSF will not become a bank," a suggestion that had been discussed at a European level "a number of weeks ago," Regling said.

Nevertheless, the matter "is no longer under discussion" by the various bodies preparing the EU summit this weekend, he said.

Such an arrangement would have contravened EU rules which forbid the ECB from financing eurozone countries' deficits, so the EU Commission, Germany and other member states "adopted a very clear stance against it," Regling said.

Eurozone finance ministers are looking for ways of boosting the firepower of the 440-billion-euro ($604-billion) fund, which financial experts say is needed to ensure the eurozone debt crisis, anchored in near-bankrupt Greece, does not engulf the much larger Italian and Spanish economies.

One possible option would involve the EFSF being able to access vast sums of money from the ECB, which has already had to step in and buy over 156 billion euros in risky Greek and other eurozone bonds in a bid to stabilise the euro.

But the ECB is vehemently opposed to this.

© 2011 AFP

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