EU bailout to swell
March 30, 2012
The debt-stricken eurozone will be able to fall back on a bigger rescue fund, Eurogroup finance ministers said at a meeting in Copenhagen on Friday. The fund will be temporarily boosted to 800 billion euros ($1.06 trillion) as part of efforts to prevent a flare-up of the continent's debt crisis.
Austrian Finance Minister Maria Fekter said the 17-nation currency grouping would combine two big funds and other smaller funds to make more money available to crisis regions.
"The boosted fund will send a convincing signal to the markets," Fekter said.
Ministers will allow the current European Financial Stability Facility (EFSF) to continue to run for a year in parallel with the eurozone's permanent rescue fund, the European Stability Mechanism (ESM), which comes into effect in July of this year.
Smaller resources from some other EU aid funds will also be channeled into the larger rescue tool.
About 240 billon euros left over from the old EFSF can now be used as a reserve, while the more permanent ESM financial "firewall" will be built up to a maximum capacity.
Mixed market response
Germany's liabilities for the bigger rescue fund will rise to a 250 billion euros, up from 211 billion euros under previous agreements.
"The proposed boost, combined with extra assistance from the International Monetary Fund, will probably be big enough to offer shelter to Spain and Italy, if necessary," Commerzbank analyst, Christoph Weil, told the Reuters news agency.
But bond markets still doubt that the new deal will provide sufficient money to countries like Spain, the eurozone's fourth-largest economy, which many say looks increasingly at risk.
hg/za (Reuters, dapd)