Eurozone ups bailout fund in bid to reassure

EUROZONE finance ministers will today increase the size of their bond bailout fund in a bid to reassure markets that investments in the region are secure.

A draft agreement, prepared for today’s meeting in Copenhagen, reveals a plan to boost the European Financial Stability Fund (EFSF) safety net to €700bn and pledge an extra €240bn if required that could be used until mid-2013 – raising their combined firepower to a potential €940bn from €500bn.

The move marks a concession by Germany – which has been reluctant to pledge more money for Eurozone bailouts – but falls far short of the €1 trillion firewall that international leaders have been calling for.

The draft statement said that if any new bailouts were to be necessary from July they would be handled, as a rule, by the permanent European Stability Mechanism (ESM) which can lend up to €500bn to Eurozone governments cut off from markets. Its precursor, the temporary European Financial Stability Facility (EFSF), which can lend up to €440bn, would only service the three bailouts it is already committed to – Greece, Ireland and Portugal.