EU bailout fund to rise to more than €1 trillion
THE EUROZONE bailout fund will see its firepower increased to more than €1 trillion to enable it to contain the debt turmoil, German government sources said.
Eurozone governments hope the European Financial Stability Fund, or EFSF, will be able to protect countries like Italy and Spain from being engulfed in the debt crisis.
To do that, however, it needs to be bigger than its current size of €440bn or see its lending powers magnified.
Frank-Walter Steinmeier, parliamentary leader of the opposition Social Democrats, and Greens leaders Cem Oezdemir and Juergen Trittin said chancellor Angela Merkel told them that the EFSF's lending powers will be boosted significantly.
"There will be a leveraging of the EFSF. It is clear that this leveraging will be around a level beyond one billion (euro)," Mr Trittin said.
That would be achieved through a combination of measures. The fund would insure investors against a percentage of possible losses on eurozone government bonds and the plan also involves the participation of outside organisations such as sovereign wealth funds and the International Monetary Fund.
The chancellor briefed MPs about the progress of the eurozone rescue plans following the weekend's EU summit.
Because of the move's significance, members of Ms Merkel's party proposed that the change receive full parliamentary approval on Wednesday - although it would have been enough for the parliament's budget committee to approve the plan.
Volker Kauder, the parliamentary leader of Ms Merkel's conservative bloc, said the decision to seek a vote was "nothing extraordinary" because "questions of fundamental significance must be decided in parliament."
Beefing up the bailout fund is one part of a three-pronged eurozone plan to solve the crisis.
The other two parts are reducing Greece's debt burden so the country eventually can stand on its own and forcing banks to raise more money so they can take losses on the Greek debt and ride out the financial storm that will entail.