GERMAN FINANCE minister Wolfgang Schäuble has said Berlin does not support increasing the size of the euro zone rescue fund, criticising as a “misunderstanding” reports that the EU is planning such a move.
On Wednesday, European Commission president Manuel Jose Barroso said the European Financial Stability Fund (EFSF), in operation until 2013, needed to be “reinforced”. This prompted speculation that the commission was calling for a top-up of the fund.
“We’re all not very happy about the remarks but we think it’s a misunderstanding,” Mr Schäuble told foreign correspondents in Berlin yesterday. “I do understand we have to discuss and think about whether to make sure that the €750 billion is in fact available. But that’s not an expansion of the rescue fund.”
The EFSF bailout mechanism has a nominal value of €440 billion on bond markets. Behind the nominal value is a lending capacity of only €250 billion which is to be underwritten by euro zone members.
The fund enjoys a triple-A rating, but only as long as some of these funds are kept in reserve. Raising the effective capacity of the EFSF closer to €440 billion would require an increase in loan guarantees from individual states to retain that rating.
“If you start discussion at a time when not even 10 per cent of the fund has been used,” Mr Schäuble added, “then you create the concern that one should expect it will be used.”
After agreement on a permanent successor bailout mechanism, likely in March, Mr Schäuble expressed optimism that progress on greater EU economic, fiscal and budgetary harmonisation would be made within the decade.
