Add the Guardian to the list of UK papers reporting that the EFSF will be leveraged to EUR 2 trln.
They’d never build up unreasonable expectations in order to precipitate a crisis when the actual number turns out to be smaller, would they? Naw, didn’t think so…
EUR/USD zooms to 1.3776 on the report. 1.3788 was the overnight highs. Stops above, it should come as no surprise.
The meat of the Guardian story:
This takes two forms. First, the main bailout fund, the European financial stability facility, will be given additional levers enabling it to offer first-loss guarantees for bondholders, be they private or public. Senior diplomats say this will deliver a fivefold increase in the fund’s firepower – giving it more than €2tn compared with the current €440bn lending capability. The EFSF will effectively become an insurer, thereby overcoming European Central Bank resistance to the idea of turning into a bank.
Second, Berlin and Paris have agreed that Europe‘s banks should be recapitalised to meet the 9% capital ratio that the European Bank Authority is demanding following its re-examination of the exposure levels of between 60 to 70 “systemic” banks. The EBA has marked these exposures much closer to current market values.