Berlusconi Defiant as EU’s Focus Shifts to Italy

"I am taking the day off today, and hereby decree that Nadia is Queen Bee for the day."

Italian Prime Minister Silvio Berlusconi said he alone can deliver the country’s promised deficit cuts as European leaders turn their attention to his government’s ability to help contain the debt crisis.

In an interview published in Corriere della Sera today, Berlusconi ruled out early elections and said the current legislature in Rome will last until 2013. He said the European Central Bank’s support will only be maintained if his government follows through on measures to rein in debt and promote growth.

“Only I and my government can achieve this reform program for 18 months, which is why there is no way for me to stand aside,” the Italian leader said in the interview.

The European Union’s latest package of measures failed to stem a rise in Italian borrowing costs, with an Oct. 28 bond sale sending yields to a euro-era record and denting the euphoria triggered after the EU summit. Group of 20 leaders will convene in Cannes, France, this week after an agreement to bolster Europe’s rescue fund to 1 trillion euros ($1.4 trillion) and persuaded bondholders to incur 50 percent losses on Greek debt.

Days after the euro area’s 14th crisis summit in 21 months sent the euro to its biggest one-day gain in more than a year, German Finance Minister Wolfgang Schaeuble warned against inflated expectations, saying more such meetings are to come. He repeated a warning to Italy to execute reform measures.

Readiness for Reform

http://www.bloomberg.com/news/2011-10-30/berlusconi-defiant-as-europe-s-focus-shifts-to-reforms-in-italy.html

Long list of dangers ahead for global economy

(Reuters) - Europe's long shadow is tempering a burst of optimism that the United States can escape recession and China achieve a soft landing.

Deep concern persists that European leaders will fall short when they try to flesh out the details of how their rescue fund can tap sufficient resources to backstop Greece and to handle a potential government financing crisis in Italy or Spain.

Europe is looking to emerging economies to provide the extra financial firepower to strengthen the fund four- to five-fold, to about 1 trillion euros, a promise that could materialize at a Group of 20 summit in France on Thursday and Friday.

The response so far from China on strengthening the fund has been very cautious, and market experts want to see a fund with resources twice the size under discussion in Brussels. That has set the stage for possible unsettling disappointment in the days ahead.

"If the absolute amount is not enough, we will be back to the storms. The break in the clouds may only last a few hours," said Ellen Zentner, senior U.S. economist at UBS.

http://www.reuters.com/article/2011/10/30/us-economy-global-weekahead-idUSTRE79T2IE20111030

Australian court ends lockout, strikes at Qantas, airline expects to resume flights quickly

DALLAS — Qantas Airways was expected to resume flying Monday after an Australian court intervened in a labor dispute that led the airline to ground its entire fleet over the weekend.

By the time the labor-relations court acted, several hundred flights had been canceled and tens of thousands of passengers stranded around the world.

Some airline industry experts say Qantas’ surprise grounding of its entire fleet Saturday could cause many travelers to book future trips on other airlines.

Qantas CEO Alan Joyce said he had no choice but to order the lockout of union workers and end months of rolling strikes that led to canceled flights, $70 million in losses and a collapse in future bookings.

Joyce told the Australian Broadcasting Corp. that he expected some flights to resume by mid-afternoon Monday. It was unclear how long it would take for the airline to resume a full schedule. The airline had estimated that it would lose $20 million a day during the lockout.

http://www.washingtonpost.com/business/industries/australian-court-ends-lockout-strikes-at-qantas-airline-expects-to-resume-flights-quickly/2011/10/30/gIQAsBl0WM_story.html

Silver is set up for explosion!

By: Peter Brandt

Price, volume and the COT data are the kings.

They were kings when Silver blasted off in late 2005. They were kings when Silver bottomed in early 2010. They were kings when Silver topped in April 2011. And they are kings behind this current strong rally.

For the past six months Silver bulls should have just kept silent and let price, volume and COT data tell the story. Price should interpret your view, not the other way around.

Silver has a combination of very strong technical factors. The weekly and daily charts display a possible 6-month bull flag.

http://peterlbrandt.com/silver-is-set-up-for-explosion/

Consumers Negative on Economy

Consumer confidence declined last week as Americans’ views of the economy sank to the lowest since the recession, highlighting the challenges facing the recovery.

The Bloomberg Consumer Comfort Index fell to minus 51.1 in the week ended Oct. 23, the lowest in a month, from minus 48.4 the prior period. Ninety-five percent of those surveyed had a negative opinion about the economy, the worst since April 2009 and one percentage point shy of a record high.

Morass in the housing market, slow hiring and limited wage growth that have soured attitudes may contain consumer spending after a third-quarter pickup. The Obama administration and some Federal Reserve officials said shoring up residential real estate would help speed the recovery.

“Consumer sentiment remains mired knee-deep in the big muddy of an epic housing mess, household deleveraging and a broken labor market,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The specter of a European debt crisis and the likelihood of no additional policy support here at home will probably keep sentiment at or near historically low levels.”

The U.S. economy grew in the third quarter at the fastest pace in a year as gains in consumer spending and business investment helped support a recovery on the brink of faltering. Gross domestic product rose at a 2.5 percent annual rate, matching the median forecast of economists surveyed by Bloomberg News and up from a 1.3 percent gain in the prior quarter, according to Commerce Department figures. Household purchases, the biggest part of the economy, increased at a more-than- projected 2.4 percent pace.

Jobless Claims

http://www.bloomberg.com/news/2011-10-27/consumers-in-u-s-are-most-negative-on-economy-since-recession.html

Some red meat for the “Occupy Wall Street” crowd

By Peter Brandt

I have not completely organized my thinking about the Occupy Wall Street movement. I sympathize with many of their arguments.

Those pundits who believe the movement will just flame out do not know their history very well. The same was said about the “Occupy University Administration Buildings” movement of the late 1960s and early 197os. Well, that movement changed history. “Occupy” should not be taken lightly, even though the movement’s messaging needs to evolve into actionable demands. Currently the Occupy movement has many diverse independent agendas. Yet, the same came be said about the change movement of the 1960s/70s — in that era the agendas ranged from rejecting the social ethics of their parents, free love, drugs and anti-war.

The movement, to be successful, needs to avoid being corrupted by the environmental wackos, the Democratic Party, the “Move On” crowd and the like. Its success depends upon remaining bottom up.

Anyway, the chart below is some real red meat for the Occupiers. It shows that the financial industry in New York City has been its own biggest benefactor — while the average man and woman has been left behind in the 1980s.

http://peterlbrandt.com/some-red-meat-for-the-occupy-wall-street-crowd/

U.S. stock market — caught between a rock and a hard place

Don’t expect a follow through trend anytime soon in U.S. stocks. This market is about to get volatile in a relatively tight range. At least, that is what the chart is telling me.

The chart of the nearby S&P futures contract shows that the market is between a rock and a hard place. Above the market exists a completed H&S top. This is a powerful reversal pattern (one that I believe will ultimately prevail).

Below the market is arguably a double bottom. The other indexes do not show a similar pattern, but the nearby S&P futures chart fulfills (barely) the general Edwards and Magee criteria for the pattern. The lows are more than a month apart, but the height is only 13% of the value (the criteria is 20%). Also, the rally from the Oct. 4 low should have experienced some pick up in volume, but not as much as was characterized by the first low.

http://peterlbrandt.com/u-s-stock-market-caught-between-a-rock-and-a-hard-place/

DeMark: S&P 500 May ‘Trap’ Bulls After Rally

The Standard & Poor’s 500 Index may climb above its close yesterday before starting a retreat in the next three weeks that will “trap” bulls, said Tom DeMark, the creator of indicators to show turning points in securities.

After the decline that began today ends just above 1,200, the benchmark gauge for U.S. equities may rally about 5 percent and begin a process that would signal another drop, DeMark said. The index’s peak will come in November after it closes higher on four to six successive days, he said.

“The market is going to build a trap, and many of the people who are bullish are going to be trapped,” DeMark said in an interview today on Bloomberg Television’s “Street Smart” hosted by Lisa Murphy and Adam Johnson. “It’s going to be tired and disappoint everyone.”

The S&P 500 fell 1.9 percent to 1,230.63 as of 3:45 p.m. New York time, after rallying 3.7 percent over three days.

DeMark said on Oct. 18 that the S&P 500 would climb to 1,254 before reversing and falling more than 5 percent. The index closed at 1,254.19 yesterday. His prediction last month that a decrease in the index that started Sept. 16 would end at 1,076 proved prescient when the gauge bottomed at 1,074.77.

‘Labored’ Upside

http://www.bloomberg.com/news/2011-10-25/demark-s-p-500-may-trap-bulls-after-rally.html

Hong Kong’s September Exports Decline for First Time in Almost 2 Years

Hong Kong’s exports declined in September for the first time in almost two years and the government warned the outlook is “bleak,” adding to the risks the city will enter a recession.

Overseas shipments fell 3 percent from a year earlier to HK$271.8 billion ($35 billion), the government said on its website today. That compared with a 6.8 percent gain in August. Exports last dropped in October 2009.

Elevated unemployment in the U.S. and Europe’s debt crisis are damping economic expansion in the city by weakening overseas demand, Financial Secretary John Tsang said Oct. 16. Trade through Hong Kong is also being hurt by moderating growth in China, the world’s biggest exporting nation.

“A prolonged period of low growth in the West, together with a soft landing in China, could mean further downside risk to export growth in the coming months,” Kelvin Lau, an economist at Standard Chartered Plc in Hong Kong, said before today’s report. “This should translate into a bigger drag on overall economic growth.”

The median estimate of 10 economists in a Bloomberg News survey was for a 6.5 percent increase in exports. None of the economists forecast a decline.

Imports increased 2.3 percent in September from a year earlier, the smallest gain since growth resumed in November 2009 after a yearlong decline during the financial crisis. September’s trade deficit was HK$40 billion, the government said.

‘Bleak’ Outlook

http://www.bloomberg.com/news/2011-10-25/hong-kong-s-september-exports-decline-for-first-time-in-almost-2-years.html

A better way to price the future takes hold

Read more: "Revealed – the capitalist network that runs the world"

SHORT-TERM thinking is a criticism often levelled at corporations and banks by anti-capitalist protesters, and they may well be right. A lack of concern for the future is built mathematically into economic theory, and this carries through to the behaviour of companies and governments. But a different way of putting a financial value on the future is changing that.

Economists assume that society will gradually get richer, typically by about 3 per cent a year - occasional crashes notwithstanding. To account for this, they "discount" future events: models might value a resource at $100 if it's immediately available, but only $97 if it is only available in a year's time.

The problem, says economist John Geanakoplos of Yale University, is that models shave off the same percentage every year. As a result, the value of assets decreases exponentially, and is effectively zero within decades or centuries. So economics effectively ignores far-future events, even if they are world-shattering.

Exponential discounting's reign is an accident of history: early 20th-century economist Paul Samuelson introduced it as a simple solution but emphasised that it wasn't necessarily right. In fact real humans do not discount exponentially. Questionnaire studies show that the rate at which we discount resources with time decreases gradually, not exponentially: we behave as if resources do still have a value significantly greater than zero in the distant future.

This is known in the trade as hyperbolic discounting, and although individuals and some markets display it, economists dislike it on the grounds that it is "irrational". That's because under hyperbolic discounting, a person has a strong preference for getting something today rather than tomorrow, but only a weak preference for getting it on day 100 rather than day 101; yet when day 100 arrives, they will strongly prefer to get the resource immediately.

http://www.newscientist.com/article/mg21228354.600-a-better-way-to-price-the-future-takes-hold.html

World power swings back to America

The American phoenix is slowly rising again. Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy. Manufacturing will have closed the labour gap with China in a clutch of key industries. The current account might even be in surplus.

By Ambrose Evans-Pritchard, International Business Editor

Assumptions that the Great Republic must inevitably spiral into economic and strategic decline - so like the chatter of the late 1980s, when Japan was in vogue - will seem wildly off the mark by then.

Telegraph readers already know about the "shale gas revolution" that has turned America into the world’s number one producer of natural gas, ahead of Russia.

Less known is that the technology of hydraulic fracturing - breaking rocks with jets of water - will also bring a quantum leap in shale oil supply, mostly from the Bakken fields in North Dakota, Eagle Ford in Texas, and other reserves across the Mid-West.

"The US was the single largest contributor to global oil supply growth last year, with a net 395,000 barrels per day (b/d)," said Francisco Blanch from Bank of America, comparing the Dakota fields to a new North Sea.

Total US shale output is "set to expand dramatically" as fresh sources come on stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since 2009.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8844646/World-power-swings-back-to-America.html

France Likely to Lose Top Rating in Stressed Economic Scenario, S&P Says

France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario, according to Standard & Poor’s.

The sovereign ratings of Spain, Italy, Ireland and Portugal would also be reduced by another one or two levels in either of New York-based S&P’s two stress scenarios, the ratings firm said in a report dated today. These assume low economic growth and a double-diprecession in the first set of circumstances, and add an interest-rate shock to the recession in the second.

“Ballooning budget deficits and bank recapitalization costs would likely send government borrowings significantly higher under both scenarios,” S&P analysts led by Chief Credit Officer Blaise Ganguin in Paris wrote in the report. “Credit metrics would deteriorate sharply as a result.”

S&P is seeking to take account of the economic slowdown that hit Europe in the second quarter and which has led the ratings company to trim 2012 growth forecasts to an average of between 1 percent and 1.5 percent. France would follow the so- called peripheral euro-region nations that have already been downgraded, with Moody’s Investors Service saying earlier this week that its top rating was under threat.

Double Dip

A double-dip recession would result from falling industrial investment and declining consumer confidence in the first scenario, according to S&P. Under these circumstances, the Tier 1 ratios of 20 banks in S&P’s 47-strong sample may fall below 6 percent, forcing governments put in about 80 billion euros ($109 billion) of new capital to return them to at least 7 percent, according to S&P. A lender’s Tier 1 ratio is a gauge of its financial strength.

The yield premium investors demand to hold French government 10-year bonds rather than similar-maturity German debt has soared this month as concern mounts that contagion from the sovereign debt crisis has leeched into core Europe. The spread is at 119 basis points, from 71.5 basis points at the end of September. A basis point is 0.01 percentage point.

BNP Paribas SA was the biggest foreign bank holder of Greek bonds at the end of the second quarter, with about 3.8 billion euros of the securities, Bloomberg data show. Societe Generale SA, which had 1.9 billion euros of the debt, was the fifth- largest foreign holder.

Recapitalizing Banks

http://www.bloomberg.com/news/2011-10-20/france-likely-to-lose-top-rating-in-stressed-economic-scenario-s-p-says.html

France Retreats in German Clash Over Bailout Fund Leverage

Ok well I said there would be no new thread for Sunday, but I cannot help myself. I just love the soap opera that is playing out in Europe. They plan to have a plan and stick to it when everyone agrees with the same plan. Until then they will just kick the can down the road for another day, making the end even worse. They seem to want to have as many people and countries involved so that no one will have a clue as to what they are up to. Why don't they just have a war and get it over with for goodness sake. To the victor goes the spoils. Oh and did you hear that Obama is going to have all the US troops out of Iraq by the end of the year? Deadlines? We can't have a deadline was a mantra of the Bush administration. I guess they can just pack everything up in two month and move along. Any bets that there is a unexpected delay? QB

France retreated from a clash with Germany over how to expand the power of Europe’s bailout fund as finance ministers entered the second of a six-day marathon to stave off a Greek default and shield banks from the fallout.

The French proposal that the fund, the European Financial Stability Facility, should get a banking license enabling it to borrow from the European Central Bank “is no longer an option,” Dutch Finance Minister Jan Kees de Jager told reporters today in Brussels. He said two options were under consideration, declining to discuss them further. Still, there are “big differences” among countries, he said.

The French flexibility indicated progress toward easing the threat to the global economy stemming from Greece. As they began their consultations yesterday, the euro-area finance chiefs received an assessment from auditors that Greek finances have taken a “turn for the worse,” requiring more official aid and deeper investor writedowns.

Stocks and the euro rallied on signs that policy makers may heed prodding from global leaders including President Barack Obama to calm global markets. Officials are also considering unleashing as much as 940 billion euros ($1.3 trillion) to fight the debt crisis, almost double the current ceiling, by combining the 440 billion-euro EFSF and its planned successor, the European Stability Mechanism.

Bank Recapitalization

http://www.businessweek.com/news/2011-10-22/france-retreats-in-german-clash-over-bailout-fund-leverage.html

Which Bank Is the Worst for America? 5 Behemoths That Hold Our Political System Hostage

We've ranked the banks based on how shamelessly they game the political process through lobbying, revolving door politics and campaign donations.

October 19, 2011  |  

The economic crash led to the loss of 9 million jobs and the biggest drop in American home-ownership since the Great Depression. Long-term unemployment, poverty and hunger have increased dramatically. People are angry. The Occupy Wall Street movement, a stand against Wall Street's greed, excess and criminality, has captured the imagination and participation of millions across the nation and the globe.

The giant mortgage bubble and the irresponsible and corrupt practices that caused the catastrophic economic crash didn't emerge out of thin air. They were a consequence of decades of pay-to-play politics rife with conflicts of interest; a political system awash in cash and legal pay-offs, designed to undermine the checks and balances that could have prevented the meltdown.

Many of these checks and balances were implemented during the Great Depression. How they were eroded and eventually abandoned is the story of a small group of banks, financial companies and elites involved in major conflicts of interest, revolving-door politics and backroom deal-making -- all to protect the interests of the global elite at the expense of the American public.

Big Finance has a long history of working hard to deregulate the American economic system on behalf of global capitalism run amok. One of its biggest coups was the overturning of the Glass-Steagall Act, a Depression-era law that created a firewall between investment banking and the commercial banks that hold deposits and make loans.

The first victory in the quest to overturn this major protection came in 1986. Under intense pressure from Wall Street, the Federal Reserve reinterpreted a key section of Glass-Steagall, deciding that commercial banks could make up to 5 percent of their gross revenues from investment banking. After the board heard arguments from Citicorp, J.P. Morgan and Bankers Trust, it loosened the restrictions further: in 1989, the limit was raised to 10 percent of revenues, and in 1996, they hiked it up to 25 percent.

Then, according to a report by PBS' Frontline, “In the 1997-'98 election cycle, the finance, insurance, and real estate industries (known as the FIRE sector), spen[t] more than $200 million on lobbying and [made] more than $150 million in political donations” – most of which were “targeted to members of Congressional banking committees and other committees with direct jurisdiction over financial services legislation.”

The following year, after 12 unsuccessful attempts, Glass-Steagall, which would have made the crash of 2007-2009 impossible, was finally repealed. And it was only then that the explosion of shaky mortgage-backed securities began. “Subprime” loans, which made the mortgage system so vulnerable, made up 5 percent of all mortgages in the U.S. the year before repeal, but had skyrocketed to 30 percent of the total at the time of the crash.

The Glass-Steagall act was killed by financial interests seeking to maximize deregulation. The result was a casino-like environment that almost destroyed the U.S. and global economy. The giants of Wall Street enjoyed a massive bailout courtesy of American taxpayers, and they're still hard at work gaming the system, lobbying hard against new regulations that might avert the next bubble-led crash.

AlterNet, in partnership with the Media Consortium, looked at the five banks that exert the most influence on our democracy. Based on their size, the amount of money they spend on campaign donations and lobbying, and the number of employees who’ve gone through the revolving door into public service, or vice versa, we determined which banks have had the worst impact on the country. We’ll rank each one based on our research, and come up with the worst of the worst--the big bank that’s done the most damage to America's economy and society.

A word of caution is in order. This report is based only on what the banks are forced to disclose. It doesn't include lobbying by corporate front-groups like the Chamber of Commerce, and it doesn't include the “independent” campaign spending that has exploded in the wake of the Supreme Court's Citizens Uniteddecision, which corporations are no longer required to disclose to the public. This is a classic story of American political corruption writ large.

Meet the Big Banks

http://www.alternet.org/story/152686/which_bank_is_the_worst_for_america_5_behemoths_that_hold_our_political_system_hostage_/?page=entire

EU Said to Mull Wielding $1.3T to Break Impasse

European governments may unleash as much as 940 billion euros ($1.3 trillion) to fight the debt crisis, seeking to break a deadlock between Germany and France that is forcing leaders to hold two summits within four days.

Negotiations on combining the European Union’s temporary and planned permanent rescue funds as of mid-2012, while scrapping a ceiling on bailout spending, accelerated this week after efforts to leverage the temporary fund ran into European Central Bank opposition and provoked the French-German clash, two people familiar with the discussions said. They declined to be identified because political leaders will have to decide.

That option may be one way out of the impasse between Europe’s two biggest economies. Finance ministers meet in Brussels today from about 2 p.m. to lay the groundwork for an Oct. 23 meeting of government leaders that had been the deadline for a solution to the debt crisis. A summit for Oct. 26 was set yesterday after Germany andFrance said the EU needs more time to seal a “global and ambitious” accord.

“The market wants the euro crisis solved yesterday, and the politicians and finance ministries seem to be saying ‘yes we can, but no we won’t,’” Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd., said in an e-mail. “Europe has the wealth to deal with Greece, it is just that the process in incredibly complex.”

Disclosure of the dual-use option helped reverse declines in U.S. stocks and the euro yesterday. The Standard & Poor’s 500 Index added 0.5 percent after losing as much as 1 percent. The euro climbed to $1.3781 in New York from as low as $1.3656.

Greek Vote

In Greece, Prime Minister George Papandreou won a parliamentary vote late yesterday on further austerity measures designed to secure more aid under the 2010 bailout. As hooded protesters threw rocks and battled riot police outside the parliament building in Athens, one man died of heart failure after a rock hit him on the head, the government said.

EU officials weighing deeper losses for Greek bondholders in a revamped bailout are concerned that any investor involvement risks further roiling markets, say people familiar with the deliberations.

Five Scenarios

Greece has accumulated at least 20 billion euros in additional financing needs since a 159 billion-euro package was set in July, because of a deepening recession and delays in enacting the plan, said the people, who declined to be identified because euro-area leaders have yet to agree on their strategy. The EU is considering five scenarios, ranging from sticking with July’s voluntary swap to a so-called hard restructuring, where investors could be forced to exchange Greek bonds for new ones at 50 percent of their value, the people said.

The 440 billion-euro European Financial Stability Facility has already spent or committed about 160 billion euros, including loans to Greece that will run for up to 30 years. Instead of replacing it with the European Stability Mechanism, which will hold 500 billion euros, in mid-2013, a consensus is emerging on merging the two funds, the people said.

The 500 billion-euro total was deemed sufficient when Greece, Ireland and Portugal were the primary victims of the debt crisis. Widening bond spreads in Italy, Spain, Belgium and France upended that calculation.

Credit Lines

Standard & Poor’s said France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario. The sovereign ratings of Spain, Italy, Ireland and Portugal would also be reduced by another one or two levels in either of New York-based S&P’s two stress scenarios, it said in a report.

The EFSF may be authorized to provide credit lines of as much as 10 percent of a country’s economy, according to a proposal prepared for this week’s meetings. By that measure, credit lines for Spain and Italy, countries that required European Central Bank support as their borrowing costs soared, could reach 270 billion euros ($371 billion).

“EFSF will need to be leveraged up,” Lael Brainard, the U.S. Treasury’s undersecretary for international affairs, said to a Senate subcommittee yesterday in Washington.

Germany and France, the euro region’s biggest financial backers, are at odds over how to do that. The fund’s tasks include recapitalization of banks and buying bonds in primary and secondary markets.

France favors creating a bank out of the EFSF, boosting its financial clout with backing from the ECB, a proposal that Germany rejects, Finance Minister Wolfgang Schaeuble told lawmakers in Berlin this week. French Prime Minister Francois Fillon said yesterday that the euro region should agree to use leverage to make the fund “massive.”

Europe’s Impact

German Chancellor Angela Merkel and French President Nicolas Sarkozy facing growing pressure from the U.S. and other global partners to end the wrangling. Federal Reserve Chairman Ben S. Bernanke briefed Senate Democrats yesterday about the European debt crisis and said it “could have an impact” on the U.S. economy, Senator Dick Durbin of Illinois said in Washington. Merkel and Sarkozy plan to meet one-on-one in Brussels tomorrow on the eve of the first summit.

The focus on the lending ceiling came after central bankers ruled out giving the EFSF a banking license, blocking the most potent option for scaling it up. France has pushed Germany to go beyond a less powerful, ECB-backed option of using it to insure 20 percent to 30 percent of new bond issues.

Still, the 280 billion euros left in the EFSF cannot be wholly committed to bond insurance, since that would drain the fund to zero, the people said. Instead, finance ministers are likely to decide on the use of the EFSF’s instruments on a case- by-case basis, the people said.

Meanwhile, the ECB is considering lending more money against asset-backed bonds if issuers provide additional information about the loans underpinning the securities, according to a person familiar with the matter. The proposed change is part of a broader ECB initiative to encourage banks to improve transparency in asset-backed bonds they sell to investors and boost confidence in a market blamed for worsening the credit crisis in 2007.