France Wants More Flexible EU Bailout Facility-Government Spokesman

France wants the European bailout facility to be more flexible in how it is used and backs any necessary adaptations, including increasing the size of the facility, French budget minister and government spokesman Francois Baroin said Wednesday.

Baroin said that France and Germany are in constant discussion about how the European Financial Stability Facility could be modified and it will be discussed at a summit of European leaders in Brussels Friday.

Possible modifications of the EFSF include allowing it to buy bonds on the secondary market, as well as bolstering its firepower.

The EFSF is currently equipped with EUR440 billion of loan guarantees allowing it to borrow money on the market and lend to financially troubled euro-zone countries under conditions. The actual lending capacity of the fund is below the EUR440 billion of guarantees.

After the weekly government cabinet meeting, Baroin also said the French government will make propositions to parliament in the coming weeks for constitutional reform to fix targets for returning to balanced public finances, similar to Germany's rules.

Baroin also reiterated the government's opposition to an immediate increase in value added tax as proposed by the leader of the majority UMP party Jean Francois Cope. Hiking VAT would be risky for the economic recovery, Baroin said.

-By William Horobin, Dow Jones Newswires, +33 1 4017 1737;

william.horobin@dowjones.com

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