Eurozone to reconsider bail-out fund debt buy

Financial Times
July 12, 2011

European finance ministers have sent a strong signal they are prepared to begin buying back significant amounts of Greek bonds on the open market, announcing they would reopen discussions to use the eurozone’s €440bn bail-out fund to repurchase the debt of distressed governments.

Monday night’s decision came after an eight-hour meeting of finance ministers in Brussels that was held against a backdrop of plunging markets and mounting fears that the debt crisis that has plagued Greece and the eurozone’s periphery for the last 18 months was now spreading to its larger members, including Italy.

The idea of using the bail-out fund, formally called the European financial stability facility, to purchase bonds from struggling peripheral countries was backed earlier this year by some of the European Union’s top economic officials, including Jean-Claude Trichet, head of the European Central Bank, and Olli Rehn, the European Commission’s economic chief.

The idea was blocked, however, by Germany and the Netherlands amid fears that giving the fund such powers would open up creditor countries to billions in additional commitments of taxpayer money.

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