THE European Financial Stability Facility (EFSF) said yesterday that it is preparing to issue €3bn in a three-year bond for Ireland and Portugal.
The eurozone bailout fund said it had picked Credit Suisse, Deutsche Bank and Societe Generale to act as lead managers for the first ever issue of three-year bonds. The facility was vague on timing, saying only that the bond would be issued "shortly".
The EFSF was forced to cancel an auction to raise money for Ireland in November as the eurozone crisis roiled markets. The Luxembourg-based fund later sold a €3bn bond but had to pay a higher interest rate than in previous auctions.
Sources said lead managers will probably hold an investor call today and decide whether to go ahead with an issue this evening.
Any deal will need to come tomorrow as Friday is a bank holiday on the continent.
The fund borrows money on the international markets on behalf of countries such as Ireland which are effectively shut off from the main markets. The Government here has asked for extra funding in the first half of the year to ensure that the State's coffers remain full as the National Treasury Management Agency (NTMA) attempts to repay several loans in the spring.
In Athens, a Greek government spokesman surprised many observers when he said his country would have to leave the eurozone if it failed to clinch a deal on a fresh €130bn bailout with the IMF and ECB.
"The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro," spokesman Pantelis Kapsis said. "The situation will be much worse."
The comments were an unusually public and stark warning from the embattled country, aimed at shoring up domestic support for tough measures and possibly also at the lenders themselves.
Greece is racing against the clock to agree with the EU, the IMF and private bondholders on the details of the rescue plan before a major bond redemption in March. It risks a default if there is no deal by this date.
Athens and its EU partners have repeatedly ruled out a euro exit, which could drag the bloc even deeper into crisis, and usually avoid saying this is a possible scenario.
But top Greek officials have warned over the past few days that a return to the drachma would be "hell" and that the country must stick to austerity to avoid it.
EU, IMF and ECB inspectors are expected in Athens later this month to flesh out the new bailout plan agreed in principle by EU leaders in October to avoid a Greek default and a euro exit.
Opinion polls show Greek voters want the government to do all it takes to stay in the euro, even if they disagree with austerity reforms.
Asked if the government would have to take extra austerity measures to make up for last year's fiscal slippages, Mr Kapsis said: "We will see. There could be a need for extra measures.
"The next three to fourth months are the most crucial and that is the reason this government exists," Mr Kapsis said.
Prime minister Lucas Papademos said in a New Year's Eve address that Greece must stick to reforms to stay in the euro. (Additional reporting Reuters)