Tensions high over bailouts as eurozone summit begins

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The Independent Online

Europe's debt crisis will top the agenda when finance ministers from the 17 eurozone nations begin meeting in Brussels today, amid signs of political discord over whether or not to increase the size of the EU emergency rescue fund.

Markets will be watching proceedings closely amid worries that, despite its €440bn (£370bn) size, the complex loan guarantees that underpin the European Financial Stability Facility (EFSF) mean that troubled countries will be able to tap it for only about €250bn – less than would be required if Portugal and Spain sought to be rescued.

Recent estimates suggest that the EFSF, forged in the wake of the Greek bailout, may need to be expanded to at least €1trillion to meet the funding needs of the continent's most vulnerable economies. It expires in 2013.

On Saturday, the European Central Bank's president, Jean-Claude Trichet, urged eurozone governments to make "enormous efforts" to cut their debts. And last week, Germany signalled that it considered discussions about increasing the size of the EFSF to be premature. The country's finance minister, Wolfgang Schäuble, said there was "no need to speculate yet over whether or not to increase the size of the rescue shield".

But the French Economy minister, Christine Lagarde, suggested that such moves were afoot, saying that governments were considering increasing the EFSF as part of a wider package.

Mr Trichet, also said the fund should be improved "quantitatively and qualitatively". The debate comes against the backdrop of a bond and currency market rally, prompted by a string of successful debt auctions.

Last week, there were more than €10bn of bond sales by Portugal, Spain and Italy. But analysts said that if policymakers "dragged their heels" as a result, they could be hit by a renewed market crisis.