Foreign investors unattracted to euro bailout fund, says Germany minister

German Finance Minister Wolfgang Schaeuble said yesterday that a bailout fund set up for debt-wracked eurozone countries was struggling to attract foreign investors, who were demanding higher guarantees.

“Difficulties have increased in finding private investors because they are demanding bigger guarantees,” he told German radio station SWR2.

“This does not mean that the fund does not have any money. It sold a bond with success last week,” added Mr Schaeuble.

“But it does show the uncertainty that investors around the world are feeling when it comes to the eurozone,” he said.

Mr Schaeuble was confirming concerns reportedly expressed by the fund’s chief, Klaus Regling, who said he was mulling raising guarantees against default offered to foreign investors to 30 per cent from 20 per cent.

According to the Bild am Sonntag weekly, Mr Regling told a meeting of German parliamentarians that the current 20 per cent guarantees offered were “too low” to cover investors’ risk.

A temporary fund, the €440 billion EFSF uses guarantees issued by eurozone governments to raise financing on money markets which are then lent to debt-wracked eurozone countries such as Ireland, Portugal and Greece. However, increasing the guarantees offered to investors would reduce the firepower of the fund, already considered far too small to intervene if the debt crisis were to claim a larger victim such as Italy.

European governments had hoped the fund would enjoy broad support in cash-rich countries such as China but enthusiasm has thus far been muted.

Nevertheless, last week the fund reported strong demand for its first funding auction of the year, during which it raised €3 billion in three-year bonds.