Finance ministers endorse Irish deal
IRELAND’S EU-IMF rescue plan anticipates that the State will be out of the private bond market for two years, economics commissioner Olli Rehn said last night as euro finance ministers endorsed the deal.
The formal approval, a largely procedural step, came as the bailout fund chief Klaus Regling declared there was no need at this time to enlarge the €440 billion European Financial Stability Facility (EFSF) bailout fund.
“I sometimes hear and read that the EFSF might be insufficient, that the amount might be too small to deal with relevant cases and I think this is wrong,” Mr Regling told reporters late last night in Brussels.
“The amounts needed for the Irish programme, which are agreed ... are relatively small compared to the lend capacity of the EFSF. The EFSF will use for Ireland much less than 10 per cent of its overall lending capacity and this implies that there are sufficient resources left to deal with other relevant cases if needed.”
Saying preparations were well under way to raise money for Ireland’s bailout, Mr Regling said he expected to sign a “loan facility agreement” with the Government before Christmas. “I expect to issue bond of around €5 billion or a bit more in the second half of January.”
The wider group of all EU finance ministers is expected today to give their endorsement to the rescue plan. Their current discussions, however, are dominated by suggestions from the IMF and other quarters that the bailout fund should be enlarged.
Such suggestions, and proposals to grant a common euro zone guarantee on sovereign bonds, met yesterday with a frosty German response. Eurogroup chief Jean-Claude Juncker said there no discussion last night on his suggestion that new euro bonds should be issued to help tackle the sovereign debt crisis.
The European Central Bank confirmed a drastic escalation in its purchase of sovereign bonds last week as the euro lost ground again as Portuguese, Spanish and Italian borrowing costs rose.
In a routine market update yesterday, the ECB said it settled €1.965 billion of sovereign purchases, its biggest intervention for 22 weeks. At the same time the bank extended its provision of unlimited crisis financing for euro zone banks.
The euro group finance ministers met last night with IMF managing director Dominique Strauss Kahn, who has been privately urging them to enlarge the fund. Amid concern that the existing temporary €750 billion scheme would be too small to withstand any intervention in Spain, ministers are discussing whether the fund should be enlarged as a show of confidence in the euro.
There is concern, however, that moves now to increase the fund could be read as a signal that a bailout of Spain was in prospect, something denied by Madrid and the EU authorities.
Germany swiftly said it opposed increasing and was immediately supported by the Netherlands.
“I see no need to expand the fund right now ... Only a very small percentage of it has been used,” chancellor Angela Merkel told reporters.
Dutch finance minister Jan Kees De Jager said “only one tenth” of the fund is currently in use so it was “a little bit premature to already talk about what about if there are no funds available anymore.”