Germany admits differences remain over eurozone fund

20th October 2011, Comments 0 comments

Differences remained between European countries over the role of the eurozone bailout fund in addressing the debt crisis, the German finance ministry acknowledged on Thursday in a document obtained by AFP.

"There remains the need for agreement on the guidelines for primary market and secondary market intervention" to buy sovereign bonds of debt-mired countries, the ministry said in a letter to members of the lower house of parliament's budgetary committee.

The European Financial Stability Facility (EFSF) is supposed to take over the task from the European Central Bank of buying bonds on the secondary market of struggling countries.

Germany and its partners agree on other EFSF measures, in particular the recapitalisation of European banks, secretary of state Steffen Kampeter wrote.

He said a possible increase in the EFSF's efficiency was currently being discussed.

"Several variations are being examined at the moment, which would allow a partial insurance of future bonds of endangered eurocountries," it said.

Such a mechanism would have a leverage effect, increasing the capacity of the 440 billion-euro ($604-billion) bailout fund.

But "currently it is not at all certain" that such a plan would be included in the rules on the functioning of the EFSF, Kampeter added.

Eurozone finance ministers are looking for ways of boosting the firepower of the 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.

© 2011 AFP

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