Doping control

16 September 2011 By Peter Thal Larsen Follow @Peter_TL

Leveraging up Europe’s Financial Stability Facility would give it the firepower to buy Spanish and Italian government debt more aggressively. But the ECB and Germany would have to play along. The chances of either doing so look remote.

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U.S. Treasury Secretary Timothy Geithner is holding talks with European finance ministers on Sept. 16 about the possibility of leverage the euro zone’s bailout fund to help resolve the debt crisis.

The euro zone’s 17 member governments are in the process of approving plans to expand the European Financial Stability Facility and to give it the power to buy government debt in the secondary market, as well as lending to governments for the purpose of recapitalising banks. However, the fund’s borrowing capacity of 440 billion euros would not be sufficient to finance a bailout of Italy.

“Geithner will probably insist on the importance of leverage to have more funds to ringfence the big Europeans, Italy and Spain, and to find a solution for Greece,” an EU official told Reuters ahead of the meeting in Wroclaw.

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