AFP, STRASBOURG, April 5: Eurozone governments should have taken more ambitious steps to strengthen the bloc's debt rescue mechanism, the European Commission president said Tuesday.
Jose Manuel Barroso, the head of the European Union's executive arm, said the 700-billion-euro European Stability Mechanism that was agreed by EU leaders last month was an 'important' move to protect the euro.
But the commission wanted the ESM, a permanent mechanism that will replace a temporary fund from 2013, to be given 'more flexibility' to help heavily-indebted nations, Barroso told the European Parliament.
'I will not hide the fact that the commission would have wanted to go further in several aspects of economic governance,' he said, referring to the principle of greater economic policy coordination within the EU.
The ESM will be allowed to buy bonds in the primary market—where states directly raise funds from investors—in return for strict budget cuts and other economic reforms agreed with the EU and the IMF where bailout loans are involved.
But the commission also wanted the ESM to be able to buy sovereign bonds of states in trouble in secondary markets where investors trade public debt. This would relieve the European Central Bank from a role it has had to take up on its own and which it wants to drop.
The EU executive also wanted the mechanism to provide more flexible lines of short-term credit for countries in financial difficulties to avoid the need for huge rescue plans.
After providing a bailout to Greece last year, the EU created a 440-billion-euro rescue fund to help any other state in the eurozone.
Ireland was the first state to tap that fund—the European Financial Stability Facility—late last year and fears have grown that Portugal too may need its own rescue package soon.
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