EFSF October Update
09 Nov, 2011
Shortly after the meeting, European President José Manuel Barroso stated that ”Europe has taken important steps forward…the package we have agreed tonight is a comprehensive package that confirms that Europe will do what it takes to safeguard financial stability…this is a marathon, not a sprint.”
It is a marathon that has not been free from attempted mutiny. In the third week of October, the parliament of the Slovak Republic initially voted ”no” to enlarging the already €440 billion strong European Financial Stability Faculty (EFSF), which is the body tasked with overseeing loans and bailout funds distributed to Eurozone members. Two days later, and after a reorganisation of the coalition government and allegiances within the Slovak parliament, the vote was easily passed. With unanimous consent of all Eurozone members affected, the EFSF will have its capital guarantee expanded to €780 billion.The EFSF saga doesn’t end there. After the meeting of October 27th, the European Council announced that the member states had come to an agreement to further expand the fund to €1 trillion. This will be accomplished not by larger contributions from each Eurozone member as in the case of previous increases, but will done by offering insurance to purchasers of members’ debt—a practice that has been blamed as one of the causes of the crisis in the first place.
Furthermore, Klaus Regling who is chief executive of the EFSF has entered into ”informal” talks with China amid suggestions that he will try and sell China on investing into the EFSF, and possibly boosting the fund by a further €70 billion. It is still too early to say what will become of this, but Mr Regling was quoted by the BBC last month saying that ”[he is] optimistic that [China and the EFSF] will have a longer term relationship”.