Eurozone's rescue fund is big enough to ease temporary tensions on the secondary markets, European Central Bank Executive Board Member Benoit Coeure said in an interview to the Financial Times.
"It is big enough for the purpose for which it was created, which is to alleviate temporary tensions on secondary markets," he said while responding to a query.
The policy maker said the European Financial Stability Facility (EFSF) was allowed to undertake secondary market interventions almost a year ago but the "governments have not yet chosen to use that possibility."
Italy and France recently floated the idea of the bailout fund buying Eurozone sovereign bonds, especially debts of countries like Italy and Spain, which are facing very high borrowing costs. However, German Chancellor Angela Merkel denied that she had knowledge of any such discussions.
Coeure said euro area bond markets are under very severe strain at the moment, in particular, the market for Italian bonds and for Spanish bonds. " It is entirely an issue for governments to decide on, it's not really something the ECB can fix," he said.
"Current circumstances would probably warrant EFSF intervention in the secondary market - provided that this happens against the right background of political decisions and solutions to the underlying issues and strong conditionality," Coeure told FT.
"The EFSF is not big enough to finance permanently euro area countries. This is not the purpose it was created for, he told the newspaper.
Responding to another question on the possibility of an interest rate reduction, the policy maker said a rate cut was discussed at the previous governing council meeting and the next council may also discuss it. He noted that at present, there is no threat to medium term price stability.
Referring to the ECB's Long-Term Refinancing Operations (LTRO), the policymaker said a third LTRO is possible. "But it would probably be warranted only in the face of generalised liquidity challenges and it is probably not the best instrument in the case of localised difficulties for banks."
Coeure said fiscal union is a "necessity" and urged countries to take steps for fiscal union if they want to keep the euro and the benefits that the euro has brought to their economies.
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