14 December 2010, 18:05  ECB calls to boost the size of euro zone emergency fund

The European Central Bank is pressing political leaders to boost the size of a fund created to preserve financial stability, two days ahead of a crucial European Union summit. 'We are calling for maximum flexibility, and I would say maximum capacity, quantitatively and qualitatively,' for the European Financial Stability Facility (EFSF), bank chairman Jean-Claude Trichet said last night in Frankfurt. On Thursday and Friday, EU leaders are expected to approve a permanent euro zone crisis fund that Economics Affairs Commissioner Olli Rehn said will provide a 'systemic' response to the euro zone debt and deficit crisis. Bond markets have targetted several weaker euro zone countries including Ireland and Portugal in the fallout from the Greek debt crisis in May. The ECB has bought government bonds as borrowing rates for those members soared, marking another stage in the crisis, but raising questions as to how far it could go with this tactic. Trichet said that 'crises of that amplitude call for all of us in Europe to reflect intensively on what should be done' and urged EU leaders to do more than they have offered to so far. 'We are not completely satisfied with the proposals put forward by the (EU) Commission and the European Council Task Force that should aim at strengthening the system of economic governance in Europe,' an ECB statement said. In particular, deadlines for action by governments running excessive public deficits should be shortened and 'sanctions should be applied in a way that is quasi-automatic and based on clearly defined criteria,' it added. EU politicians that are supposed to keep an eye on each others' finances have considerable say in such matters but have in the past been reticent to approve painful sanctions on each other. It has emerged that Greece, for example, joined the euro zone with bogus figures, and growth data since 2004 are still not considered final by the EU's Eurostat statistics service. Trichet has called several times for governments to make a 'quantum leap' in governance in response to the crisis and said he believed they would rise to the challenge owing to pressure being brought by emerging economies.

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