Oct. 24 (Bloomberg) -- The European financial backstop’s firepower can be boosted in two different ways that aren’t mutually exclusive, according to a European Union document provided to German lawmakers and obtained by Bloomberg News.
“The capacity increase in both options is achieved by combining public and private resources in order to attain financing for member states at sustainable prices,” the document said.
While the first model would increase the European Financial Stability Facility’s capacity by insuring a fraction of countries’ funding requirements, the second model combines capital from European and non-European public and private investors, it said.
“The leverage which can be achieved can only be determined after dialogue with investors and rating agencies around the new instrument, and in the light of prevailing investor appetite over time for the sovereign bonds of particular member states,” the document said.
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