Bailout czar upbeat despite rate cut

SINGAPORE - Agence France-Presse

Klaus Regling of the European Financial Stability Facility, is seen in this photo. REUTERS photo

The eurozone will not break up despite the debt crisis sweeping the currency bloc, the chief executive of the European Union bailout fund said yesterday.

Klaus Regling, head of the European Financial Stability Facility (EFSF), also said that a ratings downgrade by Standard and Poor’s on Monday will have limited impact on the fund.

“The euro will not break up. (The) economic costs of that will be very high,” Regling told reporters in Singapore, adding that investors’ fears over such a development were “unfounded.”

“No country will be forced to leave the euro area,” he said at a news conference after meeting with government officials and investors in the wealthy city-state.

“ We are family and no family member is forced out as a policy objective,” he said. “If things go terribly wrong it might happen but it’s not something that is actively pursued by anybody with something to say in the euro area.”

Regling said that S&P’s decision to cut the EFSF’s credit rating by one notch to AA+ will have little impact because two other credit risk evaluators, Moody’s and Fitch, kept their triple A ranking on the bailout fund.

“There’s no need to get overly excited yet,” he said. “As long as it is only one ratings agency, there is not much of an impact... there is no need to do anything really.”

S&P’s decision was the result of downgrades to France and Austria’s triple-A ratings since they served as top-level guarantors of the EFSF, a temporary bailout fund that uses guarantees from members to borrow money at low rates.