New bailout fund 'to increase to 1 trillion euros'

 

The eurozone bailout fund will see its firepower increased to more than 1 trillion euros (£869 billion) to enable it to contain the Eurozone debt turmoil, German government sources said today.

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 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.

Getting Greece's private bondholders to take deeper losses to lighten the country's deb load is proving particularly difficult. Experts agree that Greece needs to write off more of its debt if it is ever to make it out of its debt hole. But many also say such a deal with private creditors needs to be voluntary. Imposing sharp losses against the banks' will could trigger massive bond insurance payments that could cause panic on financial markets.

While European governments finalise their comprehensive plan, the European Central Bank has been taking on the role of fire-fighter by buying the bonds of financially weakened governments on the open market. That keeps the bond prices up and the rates down, allowing the countries to borrow on financial markets at lower rates than they otherwise could.

French Finance Minister Francois Baroin said France, in a bid to "avoid tensions," has agreed to abandon its push to turn the EFSF into a sort of bank that would give it access to the ECB's unlimited source of money. The idea clashes with German traditions of economic management and fears of printing money to pay for the governments' debt.

"We know that the Germans don't want this," he said.

Differences between Germany and France have been blamed in part for the failure of talks last week and an EU summit on Sunday to produce a comprehensive new plan to stem the eurozone's debt crisis.

AP

Arts and Entertainment
The eyes have it: Kate Bush
music
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
Al Pacino in ‘The Humbling’, as an ageing actor
filmHam among the brilliance as actor premieres two films at festival
News
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
people
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Mario Balotelli in action during his Liverpool debut
football ...but he can't get on the scoresheet in impressive debut
Environment
Pigeons have been found with traces of cocaine and painkillers in their system
environmentCan species be 'de-extincted'?
Arts and Entertainment
booksExclusive extract from Howard Jacobson’s acclaimed new novel
News
i100
Arts and Entertainment
A Pilgrim’s Progress is described by its publisher as “the one-and-only definitive record” of David Hockney's life and works
people
Sport
Loic Remy signs for Chelsea
footballBlues wrap up deal on the eve of the transfer window
News
i100
Arts and Entertainment
Art
Arts and Entertainment
Elizabeth McGovern as Cora, Countess of Grantham and Richard E Grant as Simon Bricker
TV
Life and Style
Instagram daredevils get thousands of followers
techMeet the daredevil photographers redefining urban exploration with death-defying stunts
Arts and Entertainment
Diana Beard, nicknamed by the press as 'Dirty Diana'
TVDaughter says contestant was manipulated 'to boost ratings'
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Maths Teacher

£85 - £110 per day: Randstad Education Cheshire: randstad education require a ...

SEN Teacher - Hull

Negotiable: Randstad Education Hull: Randstad Education are recruiting for spe...

Primary Teacher

Negotiable: Randstad Education Plymouth: Randstad Education Ltd are seeking EY...

Primary Teacher

Negotiable: Randstad Education Plymouth: NEWLY QUALIFIED TEACHER WE CAN HELP ...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor