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EU members to ratify new rescue plan by mid-October

CHANGES allowing Europe's rescue fund to cut its interest rates and increase the terms of its loans are expected to be ratified by all nations "before mid-October", European policymakers pledged yesterday.

Europe's finance bosses also insisted that so-called eurobonds were not dead despite Germany's staunch opposition, but warned that "further reinforcement of economic governance" would be a "necessary condition" of any scheme.

The comments came after a meeting of European finance ministers, where US Treasury Secretary Tim Geithner also proposed the prospect of "leveraging" the €440bn fund to amplify its impact.

A scheme could potentially boost the effectiveness of the European Financial Stability Facility (EFSF) by allowing it to borrow money, following a model used by the US treasury department.

Eurogroup President Jean-Claude Juncker said: "We are not going to discuss the increase or expansion of the EFSF with a non-member of the euro area."

Meanwhile, the EU's economics chief Olli Rehn said the commission was proceeding with a "feasibility study" into eurobonds that would allow eurozone countries to raise finance collectively -- despite German opposition.

The study will "dig deep into economic and legal-related issues to any possible introduction," Mr Rehn said.

He stressed a "necessary condition" of any form of eurobonds would be "further reinforcement of economic governance in Europe. . . implying sustainability of public finances and economic growth methods".

"Otherwise, eurobonds would just turn into junk bonds and that would not help anyone," Mr Rehn said.

Irish Independent