Trichet backs calls for rescue fund improvements

ECB chief says European Financial Stability Facility must be more flexibile.

Jean-Claude Trichet, the president of the European Central Bank, has described as “urgent” proposed improvements to the EU’s €440 billion emergency rescue fund.

Speaking at today’s European Central Bank (ECB) press conference in Frankfurt, Trichet underlined his belief that the European Financial Stability Facility (EFSF) should be able to draw on more reserves.

He said there needed to be an “improvement in quantity and quality” of the fund, adding that “everything is urgent in the present circumstances”.

“We are asking governments to improve the EFSF in quantity and quality – in flexibility in the intervention of the EFSF,” he added.

The European Commission announced yesterday that officials were working with leaders of eurozone member states to “reinforce the effective lending capacity” of the facility and “widen the scope of its activity”.

Although the total capacity of the EFSF was set in May at €440bn, the amount that can be used as loans is estimated to be between €250bn and €255bn because loans are guaranteed to achieve the fund’s triple-A credit rating.

Trichet refused to be drawn on what he meant by an improvement in quantity and quality. He also said that he would not comment on whether the ECB bought Portuguese bonds yesterday in an auction that raised €1.25bn. Market analysts say that the ECB has been buying the bonds of the most indebted eurozone countries.

Trichet said that this programme was “ongoing” but did not say whether the ECB had bought bonds during the past few days.

Today, a five-year bond auction in Spain raised €3bn via an auction of five-year bonds. Italy’s government sold €6bn in medium- and long-term bonds. Both countries were forced to pay higher yields than in previous auctions.