EU finance ministers have clashed over how to make the eurozone’s main rescue fund more effective.
Politicians from some of the eurozone’s largest member states have made public their positions on how to make improvements to the €440 billion European Financial Stability Facility (EFSF).
At the heart of the discussion is whether the amount of money in the fund should be increased or whether it should be made more flexible so that more of the €440bn can be used.
Didier Reynders, Belgium’s finance minister, said today that the size of the facility should be doubled. Governments are also discussing whether the facility could be used in different ways, for example to buy government bonds.
Only about €250bn of the EFSF can be used as loans because part of the money has to be kept in reserve to provide guarantees to ensure its triple-A credit rating.
One of the problems troubling EU leaders is how to convince markets that there is enough money available without it being seen as if they need to use it, for example to bail out Portugal.
Wolfgang Schäuble, Germany’s finance minister, yesterday rejected calls for more money to be directed towards the fund and instead suggested that a way should be found to access more of the existing €440bn – which, together with International Monetary Fund and European Commission financing, is part of an overall €750bn rescue package.
In a thinly veiled criticism of José Manuel Barroso, the president of the European Commission, who announced on Wednesday that discussions to improve the fund were under way, Schäuble told reporters: “We are all not very happy about the remarks but we think it’s a misunderstanding.
“I do understand we have to discuss and think about whether to make sure that the €750bn is in fact available. But that’s not an expansion of the rescue fund.”
He added: “If you start discussion at a time when not even 10% of the fund has been used then you arouse the expectation that it will be used.”
He also contradicted Barroso by saying that any agreement was unlikely before March. Barroso said on Wednesday that he hoped decisions would be made at the meeting of EU leaders on 4 February.
Schäuble warned that the “artificial debate” surrounding a possible expansion of the fund was itself leading to uncertainty on the markets.
However, Reynders made it clear that he does favour a doubling of the fund.
He said: “I think it would be a perfectly reasonable goal to double the capacity. I think it would be sensible to double the money both for the current mechanism and for the future permanent mechanism [which is due to be implemented in 2013]. It would mean doubling the guarantees, which were €400bn so far.”
He confirmed that the Commission and the European Central Bank had already started discussing such a proposal.
Christine Lagarde, France’s finance minister, appeared to back Reynders. She said that the fund should be increased “if necessary”, in order to demonstrate “determination” to defend the euro’s stability.
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Eurozone finance ministers are due to meet in Brussels on Monday.