EFSF changes to get green light in October, survey says

The eurozone’s financial rescue fund seems set to win parliamentary approval by mid-October for expanded powers to help member states in difficulty despite mounting hostility in northern Europe towards further bailouts.

A Reuters survey suggests new rules allowing the European Financial Stability Facility to buy bonds on the secondary market and give precautionary credit lines to countries before they are shut out of credit markets face few obstacles in national legislatures with vocal Eurosceptical minorities.

Goverments in Germany, Austria, Finland, the Netherlands and Slovakia say they are confident their parliaments will approve a July 21 agreement by euro zone leaders to widen the scope of the 440-billion-euro EFSF when they resume business in the coming weeks.

The main political risk to approval is if debate takes place amid new demands from European officials to increase the size of the bailout fund, or to take more radical steps such as issuing joint euro zone bonds, government sources say.

A European Central Bank policymaker voiced concern on Tuesday at the slow pace of implementation of the summit decisions, saying it was unsettling investors.

“At the moment we are seeing large delays here, and of course then great uncertainty on the markets,» Ewald Nowotny of Austria said in a radio interview.

Parliaments and markets function to different timelines. Most legislatures are in summer recess until next month and governments have chosen not to recall them, perhaps to avoid creating a sense of emergency.

The ECB began buying Italian and Spanish bonds on Monday to try to arrest the euro zone’s widening sovereign debt crisis until the EFSF receives its new powers.

German Chancellor Angela Merkel, whose country is the eurozone’s chief paymaster, pledged a joint statement with French President Nicolas Sarkozy on Sunday to obtain parliamentary approval by the end of September.

The one place where the issue is straining a governing coalition is Bratislava, where parliament speaker Richard Sulic of the Freedom and Solidarity (SaS) party says Slovakia should reject any changes to the rescue fund.

“We will do everything we can in order for the parliament not to approve it,» Sulik told reporters on Monday.

But he is under strong political pressure to back down and even if SaS, one of five parties in the coalition, were to vote against the measure, the pro-euro left-populist opposition SMER party might support it.

Eurozone newcomer Slovakia refused last year to take part in the first bailout of Greece, arguing that Slovaks were far poorer than Greeks and should not pay for their profligacy.

The Dutch parliament may be the last to endorse the deal in October.

The measure does not legally require parliamentary approval since it does not affect the Dutch share in guarantees for the EFSF, but the minority centre-right government wants lawmakers’ political support.

In Germany, some sceptical lawmakers in Merkel’s Christian Democratic Union are trying to bring forward a party conference before the vote to exert control on her European policy, but they seem unlikely to prevail. Leaders of her liberal Free Democratic Party coalition partners expect a clear majority of their lawmakers to support the EFSF changes.

The opposition Social Democrats have said they will vote for the EFSF measure, so its passage is assured.

Finnish Prime Minister Jyrki Katainen told Reuters he expected parliamentary backing but also stressed that Sunday’s Franco-German statement could not and did not commit the EFSF to buying the bonds of weaker member states.

“No two countries can decide on behalf of others, and they haven’t decided between themselves on buying some country’s bonds either,» Katainen said in an interview on Monday.

The eurosceptical opposition True Finns have surged into the lead in opinion polls after this year’s general election thanks to their unbending opposition to euro zone bailouts.

Katainen demanded last month that any further loans to Greece be backed by collateral, but the summit agreement was vague on that point.

His comments highlighted a gap in expectations between the ECB, which wants the euro zone rescue fund to take charge of bond-buying as soon as possible, and northern member states where that idea remains unpopular.

ECB policymakers are pressing for the EFSF to be at least doubled in size, central bank sources say.

But the German and Dutch governments slapped down European Commission President Jose Manuel Barroso last week when he suggested in a letter to euro zone leaders that the fund’s fire-power needed be reviewed.


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