The 17 States of the euro area, which will meet in Brussels on Wednesday, the Fund should strengthen assistance to members of the bloc in trouble, in an attempt to stem the debt crisis that threatens to new countries. According to German MPs, the ability of the fund could be increased to over 1,000 billion euros. They will vote Wednesday.
According to a document obtained by The Associated Press, the euro area would strengthen the European Financial Stability Fund (EFSF), which now has 440 billion euros by offering insurance against losses to investors in the sovereign states and attracting capital from private investors and sovereign wealth funds.
Block hopes that EFSF enlarged and multiplied powers will be able to prevent large economies such as Italy and Spain to switch to turn the debt crisis.
Leaders of the opposition in the German Parliament, informed of the plan Monday by Chancellor Angela Merkel [Unlink]
, said that the lending capacity of EFSF would reach "beyond 1,000 billion euros." In all likelihood, the text should be widely adopted by the Bundestag on Wednesday.
But the project working group of the eurozone, the German government shared with members picked Monday, does not mention a figure, noting that "a more accurate figure on the magnitude of the effect of Lever can be determined after contact with potential investors' and rating agencies.
Shortly after begin a new European summit in Brussels, in which should be adopted new rules concerning the EFSF.
But the former Belgian Prime Minister Guy Verhofstadt [Unlink]
, leader of the Liberals (ALDE) to the European Parliament, already a critical solution that considers short-termist. For him, "you increase the firepower Wednesday but with the means and instruments that are not convincing to the markets in the medium term."
Strengthening Aid Fund is supposed to ensure "continued access to the markets of countries in the euro area under pressure and the correct functioning of the market for sovereign debt," the document seen by the AP.
The EFSF should be able to provide investors with partial insurance against losses on the obligations of States in the euro zone to make them safer and therefore more attractive.
The project of the euro zone also provides for the establishment of one or more investment vehicles, which partially offset possible losses on sovereign debt to attract investors such as sovereign wealth funds, "a mix of public capital and private capital to expand the resources available. "
The paper stresses that the EFSF should "benefit from the flexibility to deploy the two options, which are not mutually exclusive."
Assurance of EFSF is designed to support demand for new bonds in the euro area, lower interest rates on loans in the financial markets and "this way to support the sustainability of public finances" highlights the project.
Lowering interest rates for states in difficulty in the euro area is crucial to stem the debt crisis because it is their outbreak that has made Greece, Portugal and Ireland are unable to borrow on the markets and forced to resort to financial rescue emergency in the euro area.
The new Investment Facility, or special investment vehicle (PAVIS), is expected to create "liquidity and capacity to develop increased market loans, to allow the recapitalization of banks by a Member State and to buy bonds on the primary or secondary market, "it added.
Any assistance from the Fund member states would be subject to conditions and "appropriate procedures for monitoring and surveillance."
Greece and she had to take drastic austerity measures in return for the first bailout of 110 billion euros granted by the European Union and the International Monetary Fund (IMF) in May 2010 for him to avoid bankruptcy.
Strengthening the EFSF is one of the three branches of the settlement plan of the crisis in the euro area.
The other two are to reduce the debt burden of Greece so that the country can eventually do without the help and forcing banks to recapitalize to withstand losses on Greek debt and the financial storm that's going triggering.
Private creditors of Greece has already agreed in the Europe Agreement of 21 July a discount of 21% of the bonds they hold, forcing them to accept a loss greater risk triggering a panic in financial markets.
Yet experts say it should delete more Greek debt up to 50% or 60% according to the German authorities, to give a chance to get out in Athens.
Meanwhile, the European Central Bank (ECB) has firefighters in the euro area having bought almost 170 billion euros of debt for countries in trouble to bring down interest rates. She hopes to end the program once the EFSF strengthened. AP