Bail-out fund could grow to £869bn, claim German opposition politicians

THE European bail-out fund could be increased to at least one trillion euros (£869 billion), German politicians have claimed.

Opposition leaders of the German government said that chancellor Angela Merkel had told them the fund was likely to be increased in size to enable it to contain the eurozone debt turmoil.

Frank-Walter Steinmeier, of the opposition Social Democrats, and Greens leaders Cem Oezdemir and Juergen Trittin said they believed the European Financial Stability Facility’s (EFSF) lending powers will be boosted significantly. 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.

Beefing up the bail-out 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.

Ms Merkel has admitted she had had a “conversation among friends” with her Italian counterpart, Silvio Berlusconi.

“Italy has great economic strength, but Italy does also have a very high level of debt and that has to be reduced in a credible way in the years ahead,” she said.