Eurozone agrees temporary boost to rescue fund

City A.M. Reporter
Eurozone finance ministers agreed a temporary increase in their financial rescue capacity to prevent a new flare-up of Europe's sovereign debt crisis, but markets may judge it too small to be convincing.

Austrian Finance Minister Maria Fekter said the 17-nation currency area would combine two rescue funds for a year to make more money available in case of emergency.

She put the total figure at some 800 billion euros (£667bn), but that appeared to include money already spent to conjure up a more impressive headline number for investors.

"Obviously markets will only have confidence in us if we agree on a strong rescue fund," Belgian Finance Minister Steve Vanackere told reporters.

"We can't consider that the crisis is over. We must find a good middle way between those who seek a (maximum) firewall and those who want it kept to a minimum."

A draft statement prepared for ministers and obtained by Reuters showed that in case of need before July 2013, the euro zone could combine the firepower of its two bailout funds to provide 940bn euros rather than a planned 500bn.

Ministers would allow the temporary 440-billion-euro European Financial Stability Facility (EFSF) to continue to run for a year in parallel with the permanent 500-billion-euro European Stability Mechanism (ESM), which starts work in July.

However, EU paymaster Germany favoured a smaller increase, and those figures included some 192 billion euros already paid or committed to Greece, Ireland and Portugal, plus money that could only be raised if euro zone states were to pay in more capital faster than planned to the ESM.