EU leaders likely to delay bailout fund decision

24 Mar 2011

1

EU leaders are not likely to decide on how to strengthen the euro zone's bailout fund until June, a move that analysts fear would undermine market confidence and possibly prolong the region's debt crisis.

EU leaders, have, for months talked about using a summit in Brussels this Thursday and Friday to strike a final agreement on a ''comprehensive package''of measures aimed at preventing the debt crisis from spreading further.

The leaders have broadly decided to hike the effective lending capacity of the European Financial Stability Facility from €250 billion to its full size of €440 billion, though they have not yet been able to agree on the modalities of doing that.

Draft conclusions for the week's summit have set out that a definitive decision on how to bolster the fund would be taken only when leaders also formalised the structure of the European Stability Mechanism, a permanent fund that will replace the EFSF in 2013.

"The preparation of the ESM treaty and the amendments of the EFSF agreement, to ensure its 440 billion euro effective lending capacity, will be finalised so as to allow national procedures to be completed in good time for signature of both agreements at the same time before the end of June 2011," the documents say.

Amid news of the delay, coupled with concerns over the prospect of Portugal going the way of Greece and Ireland in looking to EU for emergency aid the euro slid down and pushed up government bond yields for weaker euro zone states yesterday.

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