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EU pins hopes on IMF to boost EFSF firepower


12:33, December 01, 2011

BRUSSELS, Nov. 30 (Xinhua) -- The European Union (EU) is working to increase the resources of the International Monetary Fund (IMF) to boost the firepower of its bailout fund, a senior EU official said Wednesday.

"We are working towards having an increase of the IMF resources. We see very much eye-to-eye with the IMF's Christine Lagarde on this," said Olli Rehn, EU Commissioner for Economic and Monetary Affairs, as he arrived for a meeting of EU finance ministers.

Eurozone finance ministers Tuesday night agreed on detailed plans to leverage the European Financial Stability Mechanism (EFSF), without giving concrete figures as to how much the leverage would be, citing "rapidly worsening market conditions."

Under the plan, the EFSF fund would be used as a sort of bond insurance vehicle that would provide partial protection of 20 to 30 percent against losses on the principal of new bonds issued by a requesting member state.

The approved plan also includes an option which would create a common investment fund to attract foreign investors to buy eurozone government bonds.

However, the program seems unconvincing in the market as the euro slipped and the European stock markets fell on Wednesday.

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