Mr. Trichet said it would be inappropriate for the ECB to lend to Europe’s main bailout vehicle, the European Financial Stability Facility. A number of both U.S. and European politicians—not least the European Union’s Economic and Monetary Affairs Commissioner Olli Rehn—have urged that the EFSF be given a banking license, which would allow it to borrow from the central bank. However, a number of ECB officials have said this would break the terms of the EU treaty on monetary financing of governments. “We consider that governments have all capacity to leverage the EFSF themselves,” Mr. Trichet said. “We cannot substitute ourselves for governments.”
German Parliament Approves EFSF’s Expansion – WSJ.com
German Chancellor Angela Merkel’s fractious coalition won a brief reprieve on Thursday, as lawmakers from the center-right ruling parties closed ranks and passed legislation to expand the euro-zone’s bailout fund.
……A total of 523 lawmakers voted in favor of the EFSF reform bill; 85 voted against, with three abstentions. The overall result includes the votes of the opposition Social Democrats and the environmentalist Greens, who unanimously backed the bill in stark contrast to Ms. Merkel’s unruly coalition.
……The 17 euro-zone governments agreed in March and July to expand and reform the EFSF, boosting the lending capacity of the fund to €440 billion ($596 billion) from €250 billion. The fund also will receive additional powers, such as the ability to extend credit lines to banks and buy bonds on the secondary market.
…….The temporary EFSF is set to expire in 2013 and to be replaced by a permanent European Stability Mechanism.
Euro-Zone Bailout Plan Progresses – WSJ.com
While German officials say they are open in principle to using the EFSF’s limited war chest “as efficiently as possible,” they say these ideas are unlikely to work well unless the ECB cooperates. So far, the ECB has rejected calls to team up with the bailout fund.
Political resistance to such a “leveraging” of the EFSF is high in Germany’s parliament, which would have to approve such a move. Ms. Merkel’s government has tried to reassure its lawmakers this week that it has no plans to make German taxpayers shoulder even bigger risks.
EU Super-Bailout Option Slips Away – WSJ
Financial markets rallied around the globe Monday as investors saw the first glimpse of real hope for containing the European debt crisis. Problem was that the lead advocates of the deal, the IMF’s Christine Lagarde and the European Commission’s Olli Rehn, are bureaucrats who don’t have to answer to electorates every few years.
Decidedly not on board were the actual governments of the 17 euro-zone nations. Euro-zone finance ministers came home from Washington doubting they could sell more risk to voters already grumbling at past and present tax money being put behind insolvent state treasuries in Greece, Portugal and Ireland.