Eurozone ministers fail to agree full expansion of bailout fund

The eurozone’s finance ministers agreed last night to allow the EFSF to give partial protection to government bond holders, but the plan to boost the bailout fund to €1trn looks unlikely to happen.

Jean-Claude Juncker said, however, expansion of the €440bn EFSF would still be “substantial”.

“We haven’t lowered our ambitions but the conditions have changed, so it will probably not be €1trn, but less.”

EU Monetary Affairs Commissioner Olli Rehn said: “We are now entering the critical period of 10 days to complete and conclude the crisis response”.

The failure to grow the bailout fund as much as planned saw both German and French shares fall modestly this morning.

However, the ministers have agreed the rescue fund should be allowed to guarantee against some of the losses debt holders suffer in the eurozone, giving the holder between 20% and 30% protection on the principal bond amount.

Ministers also moved yesterday to create parallel investment funds to the EFSF, to allow public and private investors to participate in the bailout program.

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