Reuters
July 16, 2011
Allowing the EFSF bailout mechanism to buy back bonds from the secondary market would help deal with Europe's debt crisis, European Central Bank Executive Board member Lorenzo Bini Smaghi told a Greek newspaper.
Euro zone policymakers are exploring ways to extend a rescue deal for overborrowed Greece and give it more time to repair its public finances. At the same time, authorities are trying to prevent the debt crisis from escalating in the bloc's periphery.
One option being looked at is enabling the European Financial Stability Facility (EFSF) to provide funds for buying back bonds from private investors, a move that could help the country lighten its debt load.
"We have said that a useful option would be for the temporary EFSF mechanism to buy bonds in the secondary market. This option, however, is not included in the design of the EFSF. If there was a way to change this, it would be useful," Bini Smaghi told Sunday's To Vima newspaper in an interview.
"This would allow the private sector to sell bonds at market prices, which are currently below nominal value. At the same time, the public sector could benefit monetarily."
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