ECB back's leaders' bailout plans

City A.M. Reporter
The European Central Bank has backed last weekend's deal between eurozone leaders on the region's new debt rules and bailout fund.

European leaders agreed to strengthen the eurozone bailout fund on Saturday, make its loans cheaper and in extreme cases empower it to buy debt direct from euro zone governments.

"The ECB welcomes the draft decision," the central bank said in a legal opinion.

"The ECB encourages Member States to approve the draft decision promptly in order for it to enter into force at the date provided in it, which is 1 January 2013."

The plans for the new-look bailout fund are due to be finalised at a two-day summit in Brussels on March 24-25.

The European Stability Mechanism (ESM) as it is known will replace the temporary European Financial Stability Mechanism, created when the eurozone debt crisis erupted last year.

The ECB maintained its warning over the "moral hazard" risk attached to the bailout fund, however, saying safeguards were needed to limit the threat of countries acting irresponsibly once the permanent euro zone-funded safety net is in place.

"Safeguards such as IMF involvement in debt sustainability analysis, programme negotiations and financing, non-concessional terms consistent with IMF practice and regular and strict surveillance" of bailout recipients were vital, it said.