Berlin hints at EFSF options to buy bonds A senior German government official dropped a heavy hint on Thursday that Italy and Spain could tap into the eurozone's €440bn rescue fund - the European Financial Stability Facility - to provide insurance to bond buyers and thus reduce the interest rate on their government borrowing. Germany is adamant that the tools already exist to help eurozone countries in difficulty, and there is no need constantly to invent new ways of seeking to tackle the region's financial crisis. The senior official, speaking on condition of anonymity, was briefing journalists ahead of the two-day European summit in Brussels that begins Thursday afternoon. He said the summit was supposed to focus on a €130bn growth plan, and on long-range reforms of the European monetary union, but the German government would discuss any crisis resolution proposals put forward by its partners. "There is a toolbox which is available," he said, referring in particular to the EFSF and the permanent €500bn European Stability Mechanism that is supposed to be set up in July. He stressed that applications for support from the funds were subject to "certain procedures and conditions." The official insisted he was not making any recommendations to Italy and Spain, the two countries under greatest market pressure, but he happened to mention the EFSF insurance scheme as one example of an existing tool that could help reduce bond yields. The insurance scheme is intended to maximise the capacity of the EFSF by using a special purpose vehicle to insure bond buyers against potential losses from investing in eurozone sovereign bonds. "It is up to them to define how they want to use this toolbox," the official said, stressing that it was not credible for eurozone members to invent new instruments before they had even tried using their existing tools. He warned against expectations of any big new decisions from the summit, stressing that the leaders intended to set out clear priorities, and a timetable for decisions, on more fundamental reforms. These include steps towards a closer fiscal union, a banking union, and ways of enforcing democratic control. Angela Merkel, the German chancellor, says the proposals on the table are "unbalanced," by putting much more emphasis on introducing measures to mutualise debt, such as jointly guaranteed eurobonds or eurobills, than on common control and supervision. The plan put forward by Herman Van Rompuy, European Council president, José Manuel Barroso, president of the European Commission, Mario Draghi, head of the European Central Bank, and Jean-Claude Juncker, chairman of the Eurogroup of finance ministers responsible for the eurozone, has four "pillars," including the banking union, fiscal union, boosting competition and growth, and reinforcing democratic legitimacy. In Berlin, the thinking is that the weakest proposals are on democratic control, which would need to be reinforced for any scheme of debt mutualisation, with the economically stronger member states effectively guaranteeing the borrowing of the weakest. Ms Merkel has said that stronger European banking supervision is necessary, and could be enforced through the ECB, but the official said the issue was too complex to agree at one meeting. The German government is deeply sceptical about providing any European system of bank deposit insurance without tighter banking supervision.