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Leveraging Explained: Europe’s Idea for Maximizing the Backstop Fund

Oct 20th, 2011 09:15 by News

20-Oct (Der Spiegel) — How can the reach of the euro backstop fund be maximized without forcing governments to throw more money at it? European leaders are considering a finance tool that would attract private investors and greatly expand the reach of the fund.

It is already an immense sum of money: Euro-zone countries have provided guarantees worth €780 billion to the currency backstop fund known as the European Financial Stability Facility. It has a lending capacity of €440 billion, with which it is to help out deeply indebted members of the currency union.

As large as it is, though, it already appears that the EFSF could in fact be too small.

…What, then, is a currency union to do? The magic word is “leveraging.” Euro-zone leaders are looking for a finance tool which could make the impact of the EFSF as large as possible.

Author key: MK - Michael J. Kosares; GC - George Cooper; PG - Peter A. Grant; JK - Jonathan Kosares; RS - Randal Strauss. [see also 12 yrs of Discussion Archives]

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