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Trichet urges enhanced Europe standby fund

Source: Reuters - Sun 16th Jan 2011

European Central Bank President Jean-Claude Trichet urged Ireland and Greece to live up to commitments made in return for financial help and said a broader European safety fund should be beefed up.

Trichet was speaking on a French talk show on the eve of a regular meeting of euro zone finance ministers which was set to discuss an increase in the effective lending capacity of the European Financial Stability Facility (EFSF).

"The feeling among governors of the European Central Bank is that this fund, taken as it stands at the moment we speak, needs to be enhanced, qualitatively and quantitatively," Trichet said on the show, hosted by French RTL radio, LCI television and newspaper Le Figaro.

"We know what quantity means. On quality, that means in terms of how it is used, which must be with as much flexibility and agility as possible," he said.

The EFSF fund can borrow money on the market with euro zone government guarantees of up to 440 billion euros but because it wants to have a triple A credit rating, the effective amount it can lend to countries in need is only around 250 billion euros.

Potential bids for help from Portugal and Spain would stretch its resources to the limit.

The European Commission and the ECB called last week for boosting the effective capacity of the EFSF as well as expanding its scope of operations. Germany, the biggest euro zone economy, is key to any agreement on changes.

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