Japan might purchase more European rescue bonds if a proper system is put in place to bail out the continent’s debt-riddled economies, Japanese Finance Minister Jun Azumi said yesterday.
“If there is any scheme that could help ease tensions worldwide, including financial markets, over the rescue of Greece, I will not reject the possibility that Japan will share some of the burden,” Azumi told reporters.
Japan is being “briefed” by European officials on the possible scheme, Kyodo news agency quoted the minister as saying.
Azumi’s comments were being interpreted as referring to a future purchase of bonds to be issued by the European Financial Stability Facility (EFSF), the eurozone’s bailout fund.
On Monday, EU Commissioner for Economic and Monetary Affairs Olli Rehn said in an interview with a German newspaper that the fund, with a 440 billion euro (US$594 billion) lending capacity, should be given “greater strength.”
Japan bought a total of 2.68 billion euros of EFSF bonds in January and June, giving it a share of about 20 percent of all bonds issued, according to the finance ministry.
The fund was established last year in the aftermath of the first Greek bailout.
Meanwhile, Europe’s failure to tackle crippling Greek debt is “scaring the world,” US President Barack Obama said on Monday as Germany rejected plans to boost funding for the EU’s debt rescue facility.
Europe “never fully dealt with all the challenges that their banking system faced,” Obama said.
“It’s now being compounded with what’s happening in Greece,” he said. “So they’re going through a financial crisis that is scaring the world.”
US Treasury Secretary Timothy Geithner also urged Europe to step up its response to the crisis, after a round of meetings involving the World Bank, IMF and G20 since Thursday.
“They recognized the need to escalate. They’re going to have to put a much more powerful financial framework behind this,” Geithner said. “I really believe that you’re going to see them do that, but we wanted to make sure they do it as quickly as they can and as definitively as they can.”
Germany on Monday hosed down a push to expand a stability fund designed to quarantine the eurozone in the event of an escalating crisis and fend off the threat of a global double-dip recession.
German Finance Minister Wolfgang Schaeuble insisted there was no plan to boost the fund’s war chest.
“We are giving it the tools so it can work if necessary,” Schaeuble said, referring to the new powers allowing the fund to lend to countries such as Italy even before they hit cashflow crises.
“Then we will use it effectively — but we do not have the intention of boosting its volume,” he said.
The EU said on Monday that international auditors have not yet set a date for a return to Athens to judge whether to approve the release of 8 billion euros in loans under a bailout from May last year.
A second, 159 billion euro bailout, involving private creditors writing off more than a fifth of what is owed to them, was agreed in July.
However, this deal has yet to be ratified in most of the 17 eurozone states, some of whom are now increasingly unhappy with the plan.