Euro Zone to Increase Its Firewall

Finance ministers are meeting in Copenhagen later on Friday to discuss increasing the size of the euro zone’s rescue funds.

The size of the firewall could be increased from 500 billion to 700 billion euros to boost a mechanism for bailing out the euro zone’s troubled countries.

Earlier this week the Organisation for Economic Co-operation and Development (OECD) recommended increasing the bailout funds to 1 trillion euros, or about 11 percent of the euro zone’s gross domestic product.

German Chancellor Angela Merkel said this week that she would support only a temporary increase to 700 billion euros. Finland and the Netherlands are also in favour of a modest increase.

However, many other euro zone members, including France, plan to support a bigger increase. As Spain and Italy’s economies are becoming more vulnerable, investors worry about whether the euro zone’s firewall could cope with more bailouts.

The finance ministers also plan to discuss making the euro zone’s second bailout fund – the European Stability Mechanism (ESM) – available more quickly. The ESM was originally intended to be a permanent replacement for the European Financial Stability Facility (EFSF), but now the two funds are expected to overlap from the middle of this year.

Source: BBC

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