EU exec could raise funds with guarantees-sources

BRUSSELS, May 7 (BestGrowthStock) – A mechanism to prevent the Greek
debt crisis from spreading to Portugal and Spain could be funded
by bonds issued by the European Commission with guarantees from
euro zone states, euro zone sources said on Friday.

European Union finance ministers on Sunday will discuss
European Commission ideas on the creation of a stabilisation
mechanism aimed at preserving Europe’s financial stability.

No details have been disclosed so far, but the sources said
EU law provided a legal base for such a mechanism.

The treaty governing the European Union says that if a
member of the 27-nation bloc is in difficulties caused by
circumstances beyond its control, EU ministers may, under
certain conditions, grant financial assistance to that country.

“Two mechanisms have been agreed — one based on article
122.2 of the Treaty saying the council can help a member state
with serious difficulties,” one of the sources said.

“The other will enable the European Commission to go on the
markets and get money with an explicit guarantee of the member
states and an implicit guarantee of the ECB,” the source added.

A second source said the ECB guarantee would be implicit, in
order not to jeopardise the bank’s independence or break EU law.

“The details of this mechanism will be agreed by Sunday and
the idea is to trigger both on Sunday,” the second source said.

Euro zone leaders, meeting on Friday, decided that they need
a mechanism to ring-fence the Greek debt crisis before markets
open on Monday to prevent it from spreading to other countries
with high deficits or debts and low growth and competitiveness.

(Reporting by Julien Toyer, writing by Jan Strupczewski,
editing by Michael Roddy)

EU exec could raise funds with guarantees-sources