Eurogroup: two options for leveraging the EFSF

At their meeting on 7 November, the finance ministers of the euro area progressed on the follow-up to the decisions taken by the euro area summit on 26 October, including work to maximise the capacity of the European Financial Stability Facility.

Jean-Claude Juncker and Olli Rehn
© European Union, 2011

EFSF leveraging

The euro area summit agreed to maximise the capacity of the European Financial Stability Facility (EFSF) without increasing the euro area member states' guarantee commitments underpinning the EFSF. This is to be achieved based on two approaches, "the partial risk protection approach" and the "co-investment approach". The two options are designed to support the continued market access of euro area member states under financial distress and to safeguard the financial stability of the eurozone as a whole.

"We will now consult market participants in order to come up with the most effective arrangements. We intend to finalise the work on the operational details of the two options by the end of November in the form of guidelines that will be approved by the Eurogroup so that implementation could take place in December," explained Jean-Claude Juncker, Chairman of the Eurogroup.

"In principle both options are not mutually exclusive", said Klaus Regling, head of the EFSF. "They could be pursued in parallel and we will decide at the end of the consultation process whether we will use only option one or only option two or both together."

Greece: waiting for confirmation

Mr Juncker said: "We welcomed the intention of Greece to form a national unity government and the firm commitment expressed by Deputy Prime Minister Evangelos Venizelos to the implementation of the current programme as well as the willingness to ask for a second programme, including a private-sector involvement component."

According to Jean-Claude Juncker, the positive decision on the disbursement of the sixth tranche would have to be confirmed. In order to be able to endorse this decision, the Eurogroup is waiting for written confirmation by the new Greek authorities and by the leaders of the main political parties that they are committed to the policy package adopted on 26 October. The Troika (representatives of the European Commission, the European Central Bank and the International Monetary Fund) is expected to return swiftly to Athens to conclude discussions with the new Greek authorities. 

Situation in Italy

Commissioner Olli Rehn said that it was now crucial for Italy to implement the fiscal policies as outlined in the letter of Prime Minister Berlusconi to the euro area summit of 26 October and to accelerate structural reforms in order to boost growth and job creation.

"We are partners of Italy in this exercise and we are working to support the Italian efforts in order to ensure fiscal stability and sustainable growth and job creation," he stated. "We will soon be starting a technical mission in Rome with the task of intensifying surveillance in line with the decisions of the euro area summit in October".

More information:
Eurogroup press conference videos
Eurogroup webpages
European response to the debt crisis