Oct. 8 (Bloomberg) -- Economic and Monetary Affairs Commissioner Olli Rehn said an overlap of Europe’s temporary and permanent rescue funds wouldn’t double the amount of capital available to fight the sovereign debt crisis.
While bringing forward the permanent fund by a year to mid- 2012 would result in some overlap with the existing fund, it wouldn’t be “to the full extent,” Rehn said in a television interview on Finland’s YLE TV1 today.
European officials are under pressure to do more to contain the region’s debt crisis as Greece teeters on the brink of default. Euro-area governments are seeking ways to improve the effectiveness of the 440 billion-euro ($590 billion) European Financial Stability Facility and its permanent successor, the 500 billion-euro European Stability Mechanism. The European Commission argues that the establishment of the ESM should be brought forward from its current start date of mid-2013.
Speeding up implementation of the fund would be a “sensible” measure “if we want Europe to have enough power to counter market turbulence,” Rehn said.
He said the EFSF will subside as countries repay their bailout loans over the long term, and the ESM will grow to its full size as its capital is paid by member states in five installments over five years. This “gradual” overlap wouldn’t double Europe’s firepower to 940 billion euros, Rehn said.
Greece has funds until mid-November and a decision on paying the sixth tranche of its initial bailout should be made by the end of this month, Rehn said. “In principle” it’s possible the tranche won’t be paid and it’s up to Greece to show it is taking action to ensure that doesn’t happen, he said.
--Editors: Matthew Brockett, Mike Harrison
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