Rescue fund struggles to raise €3bn for Ireland

THE euro crisis intensified last night as the EU’s rescue fund found it difficult to raise €3bn on the markets for Ireland and had to pay its highest rate so far for the money — the cost of which will be passed on to Ireland.

The ECB also had to step in and buy Italian bonds, and those of Spain that too were experiencing exceptionally high rates.

Finance Minister Michael Noonan said the ECB must buy euro countries’ bonds to ensure the currency is not overrun. Eurozone finance ministers discussed two structures proposed by the European Financial Stability Facility aimed at increasing the amount of money available to defend the euro to €1 trillion.

But it could be December before they are ready to be launched and there are fears that with Italy, Spain and other countries struggling this may not be soon enough.

And Greece was sent a stern warning by Economics Commissioner Olli Rehn, who said it would not receive the €8 billion now weeks over due until all parts of the new government signed their acceptance of the austerity measures that go with both its €240bn loans.

Meanwhile, Mr Noonan said the proposals to leverage up the firewall potential of the EFSF were good proposals. “But of course it will take time before the technical work is done to enable that to happen.

“So in the meantime and in parallel, the ECB has a role and must continue to pay a role, until the EFSF firewall is put in place — whenever that may be. And even when that is put in place it will be tested, so I think the ECB must carry out a parallel function until it is quite clear that the new firewall is doing its job.”

Asked if he believed the euro had that amount of time, he said: “That is why I am saying that the ECB must stand ready to provide the firewall immediately.”

EFSF head Klaus Reglin said the two options for leveraging the EFSF fulfilled the criteria of not increasing the guarantees from eurozone states. Both were designed to allow members to continue to access the markets if they were under stress and would safeguard the eurozone as a whole, he said.

The option of a co-investment fund would allow a combination of public and private funding to enlarge the amount of money available. It could invest in primary or secondary bonds or euro area member states. Financing would be linked to conditions for the member state, he said.

The EFSF would now consult market participants and come up with the most suitable arrangement with the intention to finalise them this month and implement it in December.