Debt rollover requires widening of safety net

European Central Bank Governing Council member Nout Wellink said the emergency fund for Eurozone countries should be doubled to €1.5 trillion (Dh7.89 trillion) if private investors are pressured to contribute additional aid for Greece, Het Financieele Dagblad reported. "If credit-rating agencies see the debt rollover as involuntary and a partial default, then contagion of other peripheral Eurozone countries takes place," Wellink, who also heads the Dutch central bank, said in an interview published yesterday in the Amsterdam-based newspaper. "If you take these risks, you need to realise you should build a safety net for that," Wellink said. "It should go to €1.5 trillion and there should be more flexibility in how the money can be spent. Also, it should be willing to do things the ECB did before," such as buying government bonds, he said. Wellink's comments were confirmed by Dutch central bank spokesman Tobias Oudejans. The European Union and the International Monetary Fund (IMF) last year created a €750 billion emergency fund for Euro-zone countries that will be replaced by the permanent European Stability Mechanism in 2013. Thirteen months after Greece was granted a €110 billion bailout that failed to halt the spread of the debt crisis to Ireland and Portugal, politicians are at odds over fulfilling a pledge to make creditors pick up some of the cost of a second rescue. Wellink, who steps down as Dutch central bank president this month, said the ECB strongly opposes an involuntary contribution from investors. "If a contribution isn't voluntary, it will lead to a chain of reactions disadvantageous for all of us," Wellink said. "Credit-rating agencies judge whether that is a credit event, and a little pressure already creates such a situation." From / Gulf News