ZONE finance ministers faced IMF pressure today to increase the size of a €750bn (£637bn) safety net for debt-stricken members to halt contagion in the single currency bloc.
But EU paymaster Germany rejected any such move and also dismissed a call by two veteran finance ministers for joint euro bonds to be guaranteed by the whole eurozone.
In a meeting today, International Monetary Fund chief Dominique Strauss-Kahn was set to urge the 16-nation single currency area to boost the rescue pool and the European Central Bank (ECB) to step up its purchases of government bonds, according to an IMF report obtained by Reuters.
European Monetary Affairs Commissioner Olli Rehn said on arrival for the meeting that the question of upgrading the rescue fund, known as the European Financial Stability Facility, was one of the issues on the ministers' agenda.
However, German Chancellor Angela Merkel said she saw no need to increase the size of the bailout mechanism, which is deeply unpopular with voters in Europe's biggest economy.
She also said European Union treaty rules did not allow for issuing common bonds, which would reduce the element of competition and the interest rate incentive for fiscal good behaviour.
The ECB engineered a dip in the soaring borrowing costs of weaker euro zone states late last week by stepping up purchases of mainly Irish and Portuguese government bonds.
Figures issued on Monday showed the central bank bought €1.965bn worth of government bonds in the week to December 3, its biggest weekly tally since the end of June.
But yield spreads of countries on the euro zone periphery over safe-haven German Bunds resumed their rise on Monday, as did the cost of insuring their debt against default.
Many analysts say only sustained, massive central bank bond-buying can reverse the trend.
The IMF report said a recovery in the euro zone, led by strong growth in Germany, could "easily be derailed" by renewed market turmoil, and described pressure on peripheral euro countries as a "severe downside risk".