Europe's EFSF bailout fund partially operational in December

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A beefed-up European debt crisis defence shield, the EFSF bailout fund, will be operational in December but fully fleshed out only in February, Jean-Claude Juncker, who heads the eurogroup finance ministers, said on Monday.

At an October 27 summit, leaders of the 17-nation eurozone agreed to ramp up the fund's firepower from 440 billion euros to one trillion euros by leveraging its capacity to intervene without actually pumping in extra funds.

Ministers looked at two options put forward by the European Financial Stability Facility (EFSF) for consideration between now and the end of November, Juncker said.

These would see a combination of: "credit enhancement to primary sovereign bonds," which involves "partial protection" or insurance allowing the bond to be issued at lower than current market yields; and the creation of country-specific "Co-Investment Funds" housed within the EFSF.

The latter would see investors basically buy shares in national bailout programmes for the likes of Greece.

The two schemes, outlined by EFSF head Klaus Regling, could still be topped up by support via special programmes created in tandem with the IMF depending on progress in talks among G20 partners by mid-February.

Euro rescue fund raises 3 bn euros, pays high rate

The European Financial Stability Facility (EFSF), the eurozone rescue fund, raised 3.0 billion euros via a bond sale Monday but had to pay more than expected and met modest interest, banking sources said.

Demand was only slightly more than the 3.0 billion euros on offer ($4.13 billion) at the sale, intended to raise funding for bailed out Ireland.

The effective rate or return paid to buyers of the bonds was 3.59 percent, higher than anticipated, the sources said.

The sale was originally due to go ahead last week but the EFSF suspended it due to the turmoil on the markets caused by doubts over whether Greece would stick to its latest euro debt rescue plans agreed only late last month.

The EFSF said at the time that it expected to hold the sale in the near future.

At the last such sale in June, the bonds were sold at rates some 0.80 percentage points lower, showing how since then investors have become more cautious in parting with money.

"You cannot compare the two sales," one of the banking sources said. The situation now "is extremely difficult for all borrowers, including the EFSF," the source said, adding that it was important for EFSF to show that it could raise the amount it wanted.

EFSF head Klaus Regling said in a statement that "that the EFSF has again attracted investors from around the world at satisfactory rates despite a difficult market."

The EFSF has the power to raise funds in the financial markets in order to provide loans to bailed out nations - Greece, Ireland and Portugal - at lower interest rates than they would get on their own.

The bailout mechanism was created to contain the eurozone debt crisis after the EU and IMF decided to provide Greece 110 billion euros in aid loans in May 2010.

Last November, Ireland was forced to seek an 85-billion-euro ($119 billion) rescue package from the European Union and the International Monetary Fund to deal with massive debt and deficit problems.

The EFSF named Barclays, Credit Agricole CIB and JP Morgan as joint lead managers for the 10-year benchmark issue for Ireland.

EFSF made its inaugural issue in January this year when it placed a five-billion five-year benchmark bond in support of Ireland.

It has placed two subsequent benchmark bonds in support of the financial assistance programme for Portugal, which was given a 78-billion-euro bailout in May.