Germany says Portugal may only tap EU rescue fund

The Wall Street Journal reports European Economics Commissioner Olli Rehn expressed concern Monday that Germany, Austria, Belgium, Estonia, Slovakia, and the Netherlands were dragging their feet in ratifying the ESM. In the meantime, the Journal reportsSpain May Tap EFSF. The article states "Power broker Germany has yet to complete the process but is expected to do so soon." That is a distinct downplay of what is really happening.

The Portuguese government almost certainly has the ECB to thank for being able to borrow 10 year debt from the markets this morning at an interest rate of around 6.7%.

Angela Merkel's German cabinet on Wednesday approved changes to the latest European rescue fund which now goes to parliament for ratification, officials said.Extending the European Financial Stability Facility's (EFSF) mandate was agreed on July 21 by European leaders to alleviate the eurozone debt crisis.The reforms must be ratified by lawmakers across the 17-nation eurozone.The EFSF, which was set up last year, is to be allowed to buy sovereign debt in public markets and loan money to eurozone governments and commercial banks under certain conditions.

Marc Chandler submits:The European Financial Stability Fund ((EFSF)) is planning its first issue this week. Talk was of a €3-5 bln of a 5-year issue priced 8-10 bp on top of swap rates. This would imply a yield of about 2.85%, compared to a 2.32% German 5-year yield. The EFSF bonds are expected to be priced tomorrow.

Portugal will not be granted a bridging loan by the European Union, EU Commission head Jose Manuel Barroso said Wednesday as negotiations on tackling the nation's debt crisis unfold in Lisbon."In conformity with existing rules... it is not possible to provide bridging loans," the former Portuguese prime minister told a press conference in Brussels, underlining that Lisbon signed up to the presently agreed scope of European rescue funding.

AFP - Europe cannot offer Portugal a bridging loan and long-term financial aid

Germany and Spain are both digging in their heels.

Europe cannot offer Portugal a bridging loan and long-term financial aid remains dependent on radical changes to its economy, the head of the European Commission said Wednesday."It is not possible to provide bridging loans," former Portuguese prime minister Jose Manuel Barroso told reporters in Brussels as negotiations on tackling the nation's debt crisis unfold in Lisbon.