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A leveraged eurozone bailout fund will wield more than €1 trillion ($1.39 trillion) in firepower, according to German opposition leaders briefed on the plan today.German Chancellor Angela Merkel reportedly (via AP) told parliamentary leaders that plans to leverage European Financial Stability Facility will be accomplished by providing first loss guarantees on peripheral sovereign bonds and contributions made by the International Monetary Fund.
The size of the leveraged EFSF falls more or less in line with expectations, and could still be short of the amount needed to properly stem crisis fears.
However, more participation from the IMF could be the plan’s golden ticket. The fund could boost the firepower available to EU leaders to stem the crisis, particularly if its resources were expanded to the extent that European Council Chairman Herman van Rompuy and European Commission President Jose Manuel Barroso suggested yesterday.
The German parliament will likely vote on proposals to leverage the EFSF on Wednesday.