Olli Rehn, the European commissioner for economic and monetary affairs, has sought to reassure financial markets that new tools to defend stability in the eurozone will be ready within a few weeks.

Speaking in Brussels today, Rehn countered market sentiment that has become increasingly sceptical that an agreement by eurozone leaders on 21 July would be able to prevent the sovereign-debt crisis from spreading to larger countries such as Italy and Spain.

“The 21 July agreement is a milestone in our management of the sovereign debt,” he said. “Such a comprehensive, detailed and technically complex agreement requires time to implement.”

Eurozone leaders on 21 July agreed on a second bail-out for Greece and to expand the flexibility of the eurozone’s €440 billion rescue fund, the European Financial Stability Facilility (EFSF).

Unrealistic expectations

Rehn said that “there were expectations in financial markets that all elements could be implemented immediately”. These expectations were “clearly unrealistic”, he said, admitting that markets had been disappointed.

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He said that the technical details of the agreement had to be accepted and ratified in each eurozone member state. “This is a necessary – and legitimate – price to pay for living in democracies,” he said.

Rehn said that his staff and officials from the EFSF and the European Central Bank were “working night and day” to complete the technical work which, he said, would be completed as a matter of urgency.

This would require weeks, not months, he said, adding that the political process would be completed by early September.

Ratification

He said that José Manuel Barroso, the president of the European Commission, had been urging eurozone leaders to speed up the ratification process in his letter sent on 3 August.

Publication of the letter yesterday caused turmoil in financial markets because Barroso appeared to be suggesting that the size of the EFSF needed to be increased in order to prevent contagion of the sovereign debt crisis.

Rehn said today that the Commission’s view had been that the effective lending capacity of the EFSF needed to be reinforced and its flexibility expanded. “This is why the European Commission was and remains satisfied with the 21 July agreement, which achieved most of these objectives with regards to the EFSF,” he said.

Rehn admitted that there had been problems in communication on the 21 July deal. “We will all have to ensure rigour in our communication and verbal discipline,” he said.