“It’s very important that the IMF globally will increase its resources either by raising its capital or by bilateral loans so that it can lend more money to eurozone countries in need”, Dutch Finance Minister, Jan Kees de Jager, said. “If we open the IMF effort that will be sufficient together with the leverage options in the EFSF.”
After a series of stop-gap accords failed to protect Italy and Spain from surging bond yields, the euro area ministers are under growing pressure from US leaders and international financial markets to find ways to boost the EFSF’s effectiveness. They agreed on a plan to guarantee up to 30 per cent of new bond issues from troubled governments and to develop investment vehicles that would boost the facility’s ability to intervene in primary and secondary bond markets.
The EFSF bond guarantees and investment vehicles can run simultaneously and could be functioning by early next year, according to a document released by the fund. “Many investors are interested and will participate if we have a solidly commercial product”, EFSF chief executive officer, Klaus Regling, said. “But don’t expect massive inflows immediately. The needs will come over time.”
“These decisions have clearly enhanced the capacity and flexibility of the EFSF”, said Charles Dallara, head of the Institute of International Finance, which represents more than 450 financial companies. “The EFSF can now issue short-term bills and use government bonds it may purchase on secondary markets for repo transactions.”
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