After a report by Britain’s Sunday Telegraph that the European Financial Stability Facility (EFSF) had to resort to buying its own bonds when investors shunned them, the EFSF denied the report, saying that the issue was a modest size because of unstable market conditions.
The Sunday Telegraph said that after the EFSF announced last week the successful sale of a bond issue, sources revealed that the issue actually met with a shortfall of more than 100 million euros ($137 million), which the paper said the rescue facility covered itself. The bond issue, for 3 billion euros, was in support of Ireland, and according to the paper, only found 2.7 billion euros’ worth of purchasers, leaving the EFSF to pick up the difference. The Telegraph characterized it as a “major failure.”
However, a spokesman for the EFSF denied that there was a problem, saying, according to a Reuters report, “The EFSF did not buy its own bonds and the book was 3 billion euros.” EFSF head Klaus Regling, according to the report, told the Financial Times on Friday that the turmoil in the markets had made it difficult to leverage the fund to the planned 1 trillion euros.