Euro zone leaders boost billionaire bailout fund
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 (667 billion pounds), 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."
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.
Fekter said the residual 240 billion euros from the EFSF would be used as a reserve buffer while the two funds run in parallel and the ESM's capital is being built up.
The residual EFSF funds - about 240 billion euros - could only be called on if the ESM, which will initially have 200 billion euros available to lend, ran out of money to finance a new bailout during that period.
Countries sharing the euro have already agreed to adopt more strictly enforced balanced-budget rules in an effort to convince markets that their public finances will be sustainable.
They also agreed to slap fines on countries that run excessive budget deficits or have large imbalances in their economies.
Spain, which has rejected all talk of seeking assistance, was set to unveil a tough austerity budget today designed to reduce its public deficit to 5.3 percent of gross domestic product this year from 8.5 percent in 2011 despite a recession.
"This is a budget that will be convincing, I am sure of that, and show the Spanish government's commitment to austerity and fiscal consolidation," Economy Minister Luis de Guindos said in Copenhagen.
The European Commission and several of the world's biggest economies have been pushing to increase the euro zone bailout capacity as much as possible, in the belief that once investors see a wall of money supporting euro zone debt, confidence would return and the rescue funds would never have to be used.
Euro zone diplomats are confident that the proposed temporary boost will be sufficient to unlock an additional 500 billion euros in contingency funds for the IMF.
The ministers are also to say that they will continue to review the adequacy of the ESM capital "as appropriate" and "in particular when used EFSF guarantees are freed once financial assistance is repaid".
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