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UPDATE 1-Euro leaders to ensure "adequate" EFSF funds-draft

Published 12/16/2010, 03:42 PM
Updated 12/16/2010, 03:44 PM

* Euro zone leaders ready to ensure adequate funds for EFSF

* Draft statement to be issued at EU summit

(Adds details, quotes)

BRUSSELS, Dec 16 (Reuters) - Euro zone leaders will declare their readiness to ensure adequate funds are available for the euro zone rescue fund, the European Financial Stability Facility (EFSF), a draft statement showed on Thursday.

The draft statement, to be issued at a two-day European Union summit in Brussels, said euro zone leaders and EU institutions would do "whatever is required to ensure the stability of the euro area as a whole".

It said the euro area leaders would therefore pursue a strategy which entailed ensuring the availability of "adequate financial support through the EFSF pending the entry into force of the permanent mechanism."

The leaders, who have been under pressure to increase the funds available to the mechanism, would "note that only a very limited amount has been drawn from the EFSF to support the Irish programme."

"We stand ready to do whatever is required to ensure the stability of the euro area," the draft said.

The EFSF was set up to help struggling euro zone countries after Greece required a rescue in May, and Ireland has also needed a bailout since then.

It has euro zone government guarantees for 440 billion euros but its effective lending capacity to euro zone governments cut off from market financing is smaller due to the need to maintain a triple A rating because not all euro zone countries issuing guarantees for the EFSF are rated triple A.

The draft statement said euro zone governments would meet fiscal consolidation targets in 2010 and 2011 and beyond.

"We are strongly committed to achieve budget deficits lower than 3 percent of GDP by 2013 at the latest," the draft said, noting Greece and Ireland had until 2014 and 2015 respectively.

The leaders will also pledge to step up structural reforms and strengthen EU budget rules on the basis of European Commission proposals from late September, the draft showed.

It said they would commit to conducting new stress tests of banks and make them fully transparent and "implement swift and decisive measures to strengthen and reform financial institutions."

They will also express full support for European Central Bank actions which contribute to the financial stability of the euro zone, the draft showed. (Reporting by Luke Baker, writing by Jan Strupczewski, editing by Timothy Heritage)

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