Tags: Eurozone | Rescue | Fund | Bonds

Eurozone Rescue Fund to Insure Bonds of Troubled Nations

Monday, 28 Nov 2011 02:37 PM

The 17-nation eurozone plans to use the European Financial Stability Facility to insure the bonds of troubled countries within the bloc, according to a new proposal obtained by The Associated Press on Monday.

According to draft guidelines, bonds being issued in the future would receive fixed credit protection equal to 20 to 30 percent. The actual rate will be determined "in light of market circumstances."

"The main objective is to facilitate issuance by member states at sustainable rates maximizing EFSF capacity while providing a predefined degree of protection to investors," the guidelines, which were approved by the German Parliament's budget committee on Monday, said.

The guidelines have been drawn up to increase the firepower of the bloc's 440 billion euro ($588 billion) rescue fund.

Despite market rumors that the EFSF might fall short of the 1 trillion euro goal it hoped to reach through leveraging, the German government still believes it to be a reachable target, according to a lawmaker on the budget committee, speaking on condition of anonymity because of the sensitivity of the issue.

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