French bid to leverage euro rescue fund via ECB ruled out

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A French bid to multiply the eurozone rescue fund's firepower by turning it into a bank that could draw money from the European Central Bank is dead, Dutch Finance Minister Jan Kees De Jager said Saturday.

The plan, long championed by President Nicolas Sarkozy and the cause of tension with German Chancellor Angela Merkel ahead of face-to-face talks between the pair in Brussels late Saturday, "is no longer an option," De Jager said.

The minister said two options remain for "leveraging" the 440-billion-euro European Financial Stability Facility (EFSF) into a trillion-euro-plus financial firewall that could protect Italy, the big worry after problems with a new Greek rescue are resolved.

But, he stressed, "neither" would involve the ECB after talks between eurozone ministers in Brussels that moved Saturday lunchtime on to the subject of how much banks will need recapitalised and when.

De Jager did not spell out what these two remaining options entailed, but Berlin would prefer to use the EFSF to insure investors against future potential losses, hoping this will restore much-needed confidence in the bonds of shaky eurozone members.

© 2011 AFP

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