The mostly likely method for leveraging the eurozone's bailout fund involves using it to provide bond insurance while combining its firepower with a special purpose vehicle drawing in funds from China or Brazil, EU officials said.
After a summit of EU leaders on Sunday to try to come up with a comprehensive solution to the crisis, officials indicated that twinning two of the options for scaling up the 440 billion euro European Financial Stability Facility might end up securing broad backing, and the summit's conclusions reflected that.
One official indicated that the special purpose vehicle could be attached to the EFSF itself, while others said it would involve the IMF. The options will have to be narrowed down by another summit on Wednesday. But Sunday's summit conclusions referred to the IMF as a possible partner.
"The G20 should ensure that the IMF has adequate resources to fulfil its systemic responsibilities and should explore possible contributions to the IMF from countries with large external surpluses," the conclusions said.
Export-giant China, which has the world's biggest foreign currency reserves, is often referred to in G20 statements as an external surplus country. It has a sovereign wealth fund managing assets of over $230 billion.
The eurozone wants to boost the firepower of the EFSF, which relies on member state guarantees to raise funds on markets, to ensure it has the capacity to safeguard Spain and Italy against the threat of further bond market turmoil.
Comments
Comments are closed for this article.