European governments moved to bolster their rescue funds, seeking to shield Spain and Italy from the fallout of the debt crisis without alienating bailout- weary voters in wealthy countries.
Finance ministers neared an agreement to run the temporary and permanent funds in parallel until mid-2013, potentially raising the upper limit on emergency lending to 940 billion euros ($1.3 trillion). Amounts immediately available would range between 340 billion euros and 640 billion euros.
?I can imagine that both instruments run in parallel so that automatically we have a higher sum overall,? Austrian Finance Minister Maria Fekter told reporters before a meeting of European finance ministers in Copenhagen on Friday.
European policymakers are trying to strike a balance between meeting international demands for a more powerful war chest and opposition in donor countries led by Germany to providing additional aid for underperforming economies on the region?s fringes.
Friday?s step will lift the maximum aid sum from 500 billion euros. It involves running the 500 billion-euro permanent European Stability Mechanism alongside the 200 billion euros committed by the temporary fund to Greece, Ireland and Portugal, according to a draft statement prepared for the meeting.
Beyond that, the temporary fund?s unused 240 billion euros could be tapped until mid-2013 ?in exceptional circumstances following a unanimous decision of euro-area heads of state or government notably in case the ESM capacity would prove insufficient,? according to the draft dated March 23 and obtained by Bloomberg News.
Friday?s meeting will deal with the conditions for deploying that extra sum, making changes in the draft statement possible. Finnish Finance Minister Jutta Urpilainen called a 940 billion-euro firewall ?too high and now we are looking for a result which we and other countries would accept.?
European officials wheeled out a variety of figures — including bilateral loans to Greece in 2010, loans from a now- defunct centrally managed fund and the European Central Bank?s cash infusion to banks — to defuse international criticism of Europe?s response to the two-year-old crisis.
Adding up loans promised since 2010 with sums available under the permanent fund starting in July, German Finance Minister Wolfgang Schauble put the size of the firewall at 800 billion euros. His number omitted the unused portion of the temporary fund. [Bloomberg]