(Updates with comments from Constancio in second paragraph.)
Oct. 10 (Bloomberg) -- European Central Bank Vice President Vitor Constancio said the region’s bailout fund should support new bond issuances by Italy and Spain.
While recapitalizing banks is “important,” the priority at the moment for the European Financial Stability Facility “is to provide support to new bond issuance by, for instance, Italy or Spain,” Constancio said in a speech in Milan today.
German Chancellor Angela Merkel and French President Nicolas Sarkozy yesterday pledged to present a blueprint to resolve the region’s debt crisis by a Nov. 3 Group of 20 nations summit. French-Belgian Dexia SA, once the world’s leading lender to municipalities, became the first bank to fall victim to the worsening crisis after concern over its European sovereign-debt holdings caused short-term funding to evaporate.
The resources of the EFSF “should be dedicated to enhance sovereign debt new issuance of securities, thus multiplying their effect,” Constancio said. “It would be less efficient to spend most of the funds available in the secondary market or in supporting banks’ capitalization.”
--With assistance from Jana Randow and Jeff Black in Frankfurt. Editors: Simone Meier, Jeffrey Donovan
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