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EFSF needs to be 'reinforced' after downgrade: Commission

17 January 2012, 18:41 CET
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(BRUSSELS) - The eurozone rescue fund, the EFSF, needs a "reinforced" lending capacity to make it more convincing, a spokesman for the EU executive said Tuesday.

The call came a day after the 440-billion-euro ($560 billion) European Financial Stability Facility suffered a knock-on downgrade, its long-term rating cut from Triple-A to AA+ after credit ratings giant Standard & Poor's penalised nine of the 17 eurozone states.

The fund's capacity to aid countries already in bailout-and-reform programmes in conjunction with the IMF is not affacted, Amadeu Altafaj, spokesman for the European Union economy commissioner Olli Rehn, told a news conference.

However, the EFSF and its planned successor as of July, the 500-billion-euro European Stability Mechanism (ESM), "could do with having their effective lending capacity strengthened, because we need a dissuasive impact" to reassure markets the EU can contend with "all eventualities."

EFSF chief Klaus Regling, whose fund enjoyed strong demand earlier at an auction of six-month debt in Frankfurt, has said the fund is adequately financed. But European Central Bank chief Mario Draghi has suggested it may need to be beefed up as it has about 250 billion left to work with.


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