December 7, 2011
The euro area’s rescue fund plans to begin selling short-term debt by the end of the month to meet its expanded role in tackling the region’s debt crisis.
The 440 billion-euro ($589 billion) European Financial Stability Facility announced a funding program that will focus on three-, six- and 12-month bills. The first auction is expected to take place before year-end, the EFSF said in an e- mailed statement today.
The Luxembourg-based EFSF gained the authority in October to buy sovereign bonds on the primary and secondary markets, offer credit lines to governments and grant aid to banks as the region’s debt troubles spread. The EFSF’s sole role until then had been to sell bonds to finance rescue loans.
“The launch of a short-term funding program is in line with the enlarged scope of activity of the EFSF to use its new instruments efficiently,” Klaus Regling, the facility’s chief executive officer, said in the statement. “The bill program will not substitute for the long-term bond program, but it will add flexibility to it.”
The euro area is beefing up the EFSF in a bid to prevent Spain and Italy from being engulfed by debt troubles that forced Greece to seek an initial rescue in April 2010, pushed Ireland and Portugal into aid programs over the ensuing year and led to a second Greek bailout in late October. The larger EFSF role may also help to relieve the European Central Bank of secondary- market bond purchases undertaken over the past 19 months to counter increases in borrowing costs.
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