The eurozone has reached a crucial juncture and its leaders will work with the European Central Bank to save the single currency, Eurogroup chief Jean-Claude Juncker said in interviews published Sunday.
“We have come to a crucial point. But we have to outline the pace and scope. We will act together with the ECB…,» he told France’s Le Figaro daily, speaking of the European Financial Stability Facility (EFSF) bailout fund.
“There is no more time to lose,» he said, adding that a review of the markets will be decided in the coming days.
In a separate interview to Germany’s Sueddeutsche Zeitung Juncker said the «eurozone has come to a stage where we must clearly show through all means possible that we are firm on assuring the stability of the monetary union.
“Nobody should doubt the will of the involved forces to show their determination,» he said.
His comments came after ECB chief Mario Draghi sent stock markets soaring and helped bring down Spanish borrowing costs sharply last week by saying the central bank was «ready to do whatever it takes to preserve the euro. And believe me it will be enough.”
The leaders of France and Germany followed up his statement with a similar joint declaration on Saturday although they did not pledge any specific action.
Since the start of the crisis, the ECB lost no time in embarking on a series of emergency measures — in addition to cutting rates — to stem the turmoil.
The EFSF rescue fund currently has a little more than 200 billion euros ($245 billion) to spend, not enough to fly to the rescue of Italy should it need a full-blown Greece-style rescue, but sufficient to have an impact on the market.
Though the fund is also able to buy public debt on the secondary market, it has never yet used that power.
Current rules state the EFSF can intervene on primary markets only for countries that have signed up to an official reform programme in exchange for a financial rescue, such as Greece or Portugal.
The EFSF can also offer credit lines as a precautionary measure or loan money to recapitalise banks.
At the last European Union summit in June, the bloc agreed that the EFSF could recapitalise banks directly, rather than by channelling funds through government, which just adds to their pile of national debt.
Juncker on Sunday also brushed off a suggestion by German Finance Minister Philip Roesler of Greece’s eventual exit from the eurozone.
“Those who think of resolving the problems of the eurozone in this manner by excluding Greece or letting it fall in the wayside have not identified the reasons for the crisis,» he told the German newspaper.
Spain is hoping a 100 billion euro credit line agreed for its banking sector will flow directly to the banks, allowing Madrid to avoid the damaging fallout likely from a request for a full-blown bailout.
The EFSF is to be replaced next year by the European Stability Mechamism (ESM), which is expected to come into force later this year.