EU ministers to double lending power of bail-out fund
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Homeless people in Madrid: the extra lending clout comes in the context of fears about Spanish solvency (Photo: AntarticoNorte)
Eurozone finance ministers have backed a doubling of the full lending capacity of a future EU bail-out fund.
As of 2013, the European Stability Mechanism, a permanent rescue mechanism to replace the bloc's current bail-out arrangement, will have an effective lending capacity of €500 billion, Luxembourgish Prime Minister Jean-Claude Juncker, the chief of the group of EU member states that use the single currency, said late on Monday (14 February) night.
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Speaking to reporters, he said he was convinced the sum should be substantial enough to soothe markets.
"I would think that this will be enough," he said.
Currently, the temporary rescue arrangements have a headline figure of €440 billion attached to the pool, but in reality have what is called an 'effective' lending capacity of around €250 billion.
This is because most of the money has to be kept back as collateral.
Details of how the eurozone will be able to deliver such a level of effective lending capacity was kicked into the long grass however, to be decided upon in the coming weeks.
EU leaders have set themselves a deadline of 25 March, the second day of the bloc's spring summit of premiers and presidents, to agree the details.
Further meetings of eurozone finance chiefs are scheduled for 11 March and possibly 21 March.
Finance ministers already agreed that the size of the ESM would be up for review every two years, however.
The fact that Germany, Europe's biggest lender, has given the nod to a hike in the fund's lending capacity, also suggests that support for its long-demanded quid pro quo, deeper liberal economic reforms, is gaining ground.
Mr Juncker conceded as much on Monday, saying that additional discussions will be necessary to ensure robust oversight of member-state spending decisions.
