EU Officials Considering Doubling Bailout FundsDecember 6, 2011 @ 3:04 PM EST
The FT is reporting that according to senior European officials, EU leaders are now considering creating a much larger pot of euros to combat the sovereign debt crisis.
The FT says that officials are considering allowing the existing €440 billion bailout fund (the EFSF) to continue when the new €500 billion facility (the ESM) goes into effect in mid-2012. This could nearly double the firepower of the Eurozone’s bailout funds.
We note that approximately €290 billion of the EFSF funds have already been commited to Greece, Ireland, and Portugal, and that the EFSF was due to be replaced by the ESM when it went into effect. However, by "leveraging up" the remaining funds, reports indicate that the fund could still reach €600 billion.
According to FT sources, supporters of the plan acknowledge that the proposal is controversial and likely to stir intense debate during the development of the new treaty.
Recall that increasing Europeans commitment to fighting the crisis has been an important demand of the ECB in order to consider increasing the central bank’s intervention.
Dow Jones had reported earlier in the day that Eurozone officials had been negotiating to boost the capacity of the bailout funds. The reported noted that the agreement may involve EU government funds via the IMF.
Stocks moved to the highs of the session on the report with DJIA currently up by 101 points.
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