The euro area’s efforts to contain the sovereign-debt crisis are working and will lead the region’s rescue fund to tap markets three times next week, said Klaus Regling, chief executive officer of the 440 billion-euro ($576 billion) European Financial Stability Facility.
Euro-area finance ministers will decide this month on how to handle the combined capacity of the EFSF and its successor rescue fund, the 500 billion-euro European Stability Mechanism, Regling said in comments to news agencies in Brussels released today. The ministers meet on March 30 in Copenhagen.
The EFSF has committed 192 billion euros for rescue programs in Ireland, Portugal and Greece, leaving 248 billion in uncommitted resources. Future lending to those countries will be carried out by either the EFSF or the ESM, Regling said.
“The euro-area strategy to resolve the crisis is working,” Regling said. “Markets have recognized the progress made by both member states and the euro area as a whole. Yields have fallen significantly since November last year for euro-area sovereign bonds and also for the EFSF bonds.”
The Luxembourg-based EFSF plans to sell 2 billion euros in six-month bills on March 20. If market conditions are right, the fund also plans to sell 1 billion euros to 1.5 billion euros in 20-year to 30-year bonds on March 19, followed by 3 billion euros or more in benchmark five-year bonds on March 22.
Europe’s sovereign-debt woes have eased significantly because of the rescue programs for struggling nations and the European Central Bank’s Long Term Refinancing Operation. The ECB has made 1.02 trillion euros of three-year loans available to banks since December.
Greece will need to “rigorously implement all measures agreed” in its new 130 billion-euro bailout package, which includes 109 billion euros in EFSF funding as well as an International Monetary Fund contribution, Regling said. Portugal is meeting its targets and its program is “on track,” and Ireland is a “success story,” he said.
Taking all three programs into account, the EFSF projects it will tap markets for 54.2 billion euros in 2012, 37.9 billion euros in 2013 and 33.8 billion euros in 2014. The 2012 figures include money disbursed in the first two months of the year.
The EFSF is moving to a new system for recouping its funding costs that will charge all countries the same rate, said Chief Financial Officer Christophe Frankel. Funds raised will be pooled and no longer attributed to a particular country, and all countries will pay the same rates.
The EFSF will have a short-term rate and a long-term rate in the new pricing structure, Frankel said.
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