Eurozone rescue fund aims for full capacity of over €2 trillion

City A.M. Reporter
EUROZONE states are preparing to allow the bloc’s permanent bailout fund to leverage its capital in the same way as its predecessor so it can reach a capacity of more than €2 trillion and rescue big countries if necessary, Der Spiegel said yesterday.

The weekly news magazine said that the European Stability Mechanism (ESM) would have two instruments like its predecessor, the European Financial Stability Facility (EFSF), that would only allow public money to be used for particularly risky transactions such as buying Spanish bonds, while private investors would provide the rest.

It had always been expected that the ESM, which is expected to come into force on 8 October with a capacity of €500bn, would have the same leverage ability as the EFSF and euro zone finance ministers reiterated this at their meeting in Cyprus earlier this month.

If the ESM uses the same leverage techniques as the EFSF, it would have a lending power of around €2 trillion without countries having to give more capital to the fund.