Tuesday 12 December 2017

European aid funds to raise loans for Ireland with €34bn bond sale next year

Jonathan Stearns

THE new European financial aid funds will begin the process of raising loans for Ireland by selling bonds up to €34bn next year and €15bn in 2012, the EU Commission says.

The announcement came as the Chinese leadership said it was helping the euro by buying the bonds of eurozone countries.

The EU bonds will be sold by the two rescue funds, the European Financial Stabilisation Mechanism and European Financial Stability Facility.

The sales, in tranches of €3bn-€5bn, "will ensure smooth market operations over the entire duration of the support programme," the commission said.

The two funds form the kernel of the €750bn financial backstop which European finance ministers set up in May.

Ireland's €85bn rescue includes €22.5bn from the EFSM, which is managed by the commission, and €17.7bn from the EFSF, which is overseen by euro-area governments.

The EFSF sells bonds backed by €440bn in guarantees from national governments.

There has been controversy over the fact that a three percentage point margin is added to the cost when a country asks for such assistance.

Ireland is the first country to use the fund.

Greece's earlier €110bn rescue involved loans from euro area governments.

China's Vice Premier Wang Qishan said yesterday that his country "has taken concrete action to help some EU members counter the sovereign-debt crisis,"

"EU members have taken a number of steps to actively respond to the sovereign-debt crisis," Mr Wang said at the start of the Third EU-China High-Level Economic & Trade Dialogue in Beijing.

"We hope these measures will quickly produce results and lead to a steady recovery of the EU economies." China holds a record €2.5 trillion in foreign currency reserves, mostly dollars.

"The comments would be a good Christmas present for the euro if Asian support for the EU continues into next year," said Kurt Magnus, executive director of foreign-exchange sales at Nomura Holdings in Sydney.

"There's a lot of people looking to sell euro and go into 2011 with a core short position and there's no way that you would be short euro, if China continued to support the region," he said.

Commerce Minister Chen Deming said China's economy faces "uncertainties" next year, and because of that the country is paying great attention to whether the EU's sovereign-debt crisis can be controlled, "especially in the first quarter of next year." (Bloomberg)

Irish Independent

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