Did Germany Finally Acquiesce To A Bigger Boost In The Eurozone Bailout Fund?

european central bank creative

Photo: AP/Michael Probst

The euro went way up on a Bloomberg report that EU finance ministers could raise the funding capacity of the combined eurozone bailout funds to €940 billion ($1250 billion) on Friday.According to Linda Yueh, Bloomberg obtained a draft of a document that will be considered at a meeting of EU finance minsters Friday. That document held plans to make €940 billion available for bailout funding during 2012, and €700 billion starting in 2013.

Numerous EU leaders and international organisations have been advocating boosting the current bailout funding capacity to €940 billion as opposed to the current €500 that will be available once the European Stability Mechanism takes effect this summer. Under such a plan, they would run the European Financial Stability Facility and the European Stability Mechanism simultaneously.

Germany has repeatedly rebuffed these plans, however, arguing that bailout funding should only be boosted to €700 billion—a combination of about €200 billion in funds that have already been dedicated to supporting Greece, Ireland, and Portugal as well as the €500 billion promised as part of the European Stability Mechanism. Even support for this plan was a concession from earlier plans that would have kept funding limited to €500 billion, including the €200 billion already committed.

This report could indicate that the Germans have changed their minds, however it’s still unclear whether this draft is just a proposal or something that has received tacit approval from EU finance ministers. Given German antagonism to the idea, most likely this is just a draft document that has not yet garnered significant approval.

This report caused the euro to jump over $1.33, reflecting hopes that a bigger bailout fund would supply more money to construct a firewall around Greece and recapitalize unstable banks.

Photo: FinViz.com

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.