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Deadline looms for final EU deal

THE final deal on the European bailout agreement is expected to be concluded next week.

European Union officials and finance ministers from the 17 countries that share the euro met yesterday but struggled to come to an agreement over an increase in the lending capacity.

The deal involves increasing the effective capacity of the bailout fund to €440bn which will allow it to buy bonds in the primary market.

The move would also soften the terms of the bailout already distributed to Greece by lowering the interest rate and lengthening the maturity of the loans.

EU leaders hope to sign off on a package of reforms to the European Financial Stability Facility (EFSF).

These reforms include giving this temporary fund and a new permanent fund -- known as the European Stability Mechanism (ESM).

The EFSF's current lending capacity is considerably lower than the fund's nominal value because many of the member states who guarantee it do not have the benefit of a triple-A credit rating.

A condition of the fund's own triple-A rating was that its lending capacity would be lower than its nominal value.