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Europe

Deeper pockets for eurozone bailout fund split Berlin and Brussels

Germany and the European Commission appear to be on a collision course over the need to expand a eurozone bailout fund to reassure markets. Berlin says it's not necessary, although there may be room for maneuver.

A man with his pants pockets inside out

Digging deeper for more money is an option

Europe appeared to be split over the need to boost the capacity of a sovereign debt rescue fund ahead of a gathering of eurozone finance ministers on Monday.

A possible increase in the size of the fund was on the agenda for the meeting, a proposal that has met with a lukewarm response from Germany.

The European Commission wants to boost the 440-billion-euro ($590 billion) European Financial Stability Facility (EFSF) in a bid to reassure financial markets about the integrity of the eurozone.

German Finance Minister Wolfgang Schäuble

Schäuble says further debate only complicates things

Commission President Jose Manuel Barroso has urged member states to take a decision by February on increasing the effective capacity of the EFSF - the centerpiece of Europe's bailout reserves.

'Fund is large enough, for now'

However, Berlin has said the fund is large enough already - only 10 percent has been used so far, to help Ireland following its banking sector crisis.

"A heated discussion is not necessary," said German Finance Minister Wolfgang Schäuble in an interview with German public radio on Monday, ahead of the meeting. "Isolated proposals don't make anything easier - just more complicated."

Schäuble said it was more important for highly-indebted countries to work at solving their own problems.

On Saturday, Chancellor Angela Merkel said that any new measures to stabilize the euro should be part of a complete strategic package, making an immediate agreement less likely.

"If the discussion is now about a further package of measures, it is especially important that we develop a common strategy that will certainly have to include closer economic coordination," Merkel told a news conference after a meeting with senior members of her Christian Democrat party.

In addition to the EFSF, the bailout reserves include 250 billion euros from the International Monetary Fund (IMF) and a further 60 billion euros from the wider EU - meaning that the entire package is worth 750 billion euros.

Fears that fund will not stretch far enough

French Finance Minister Christine Lagarde

Lagarde echoed the German sentiments on behalf of France

Some analysts warn that this would be too little to rescue Spain from its financial woes, especially if debt-laden Portugal were to also accept help.

Belgian Finance Minister Didier Reynders has called for the total value of the safety net to be doubled, to 1.5 trillion euros.

France has sided mostly with Germany in the debate for increasing the eurozone fund.

French Finance Minister Christine Lagarde said on Friday that it was "premature" to put a new figure on the fund. She admitted, however, that an increase was among the options being debated.

Author: Richard Connor, Matt Zuvela (AFP, dpa, Reuters)
Editor: Nancy Isenson

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