Central Banks

Sunday, January 22, 2012 - 17:30

ECB Draghi Suggests Deal For E750 Bln EMU Bailout Fund: Press

-- Italy Calls For Doubling Fund to E1 Billion

FRANKFURT (MNI) - European Central Bank President Mario Draghi, hoping for a compromise between a recalcitrant Germany and other Eurozone countries that would like to see more funding for Europe's bailout fund, has proposed using unspent cash from the temporary bailout fund, the EFSF, to boost the permanent fund, the ESM, to E750 billion, German magazine Spiegel reported without specifying its sources.

The magazine also reported that Italy's Prime Minister Mario Monti wants the Eurozone to double the size of the ESM to E1 trillion from the current E500 billion, in order to help restore trust in the Eurozone and bring down borrowing cost for troubled countries.

According to the report, Monti has informed the German government of his demand. Berlin thus far has steadfastly refused to consider additional funding for the bailout fund.

Monti's proposal would not come as a surprise after the Italian premier said in a recent interview that he would try to show Berlin it is in "its own enlightened self-interest" to use its strong fiscal standing to help lower the borrowing costs for Italy and other highly indebted nations.

Nor is Draghi's position a surprise. The ECB chief has said previously that "anything the governments are able to do to increase that firepower [of the bailout fund] is to be welcomed by the ECB."

The ESM is scheduled to replace the EFSF in July 2012. It is expected that at the time, around E250 billion of the temporary fund's resources will not have been used.

--Frankfurt newsroom +49 69 72 01 42; e-mail: jtreeck@marketnews.com

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