Europe's effort to expand its bailout fund to 1 trillion euros($1.3 trillion) is falling short, forcing renewed consideration ofa role for the European Central Bank in insulating Spain and Italyfrom the debt crisis, two officials familiar with the discussionssaid.

Finance ministers are holding an initial discussion today onchanneling ECB loans to cash-strapped euro nations through theInternational Monetary Fund, aiming to bring the central bank ontothe front lines without violating its ban on direct lending togovernments, said the people, who declined to be identified becausethe talks are at an early stage.

With renewed prodding from the U.S., European leaders arepondering a fifth “comprehensive” fix after an October blueprintfailed to stop a widening rout in Italian markets or quellspeculation that France will lose its top credit rating. Germany ispushing for governance changes at a summit next week that wouldtighten enforcement of budget rules, a move that might make iteasier for the ECB to step in.

The rescue fund “alone will not be able to solve all theproblems,” Luxembourg Finance Minister Luc Frieden told reportersbefore tonight's Brussels meeting. “We have to do so together withthe IMF and with the ECB in the framework of its independence.”

Solving the European crisis is of “huge importance” to the U.S.,President Barack Obama told European Union President Herman VanRompuy and European Commission President Jose Barroso at the WhiteHouse yesterday.

Four weeks after taking over from Jean-Claude Trichet, ECBPresident Mario Draghi hasn't tipped his hand about a possible rolefor the central bank, apart from saying the ECB's 18-month- oldbond-buying program is “temporary” and “limited.”

Over the opposition of the two Germans on its 23-member council,the bank has bought 203.5 billion euros of bonds of three countriesreceiving financial aid — Greece, Ireland and Portugal — plus Italyand Spain.

“The ECB has to save the euro,” Holger Schmieding, chiefeconomist of Joh. Berenberg Gossler & Co., said in an e-mailednote. “ECB members and Berlin may be starting to realize this.”

'Larger Role'

While German Chancellor Angela Merkel last week persuaded FrenchPresident Nicolas Sarkozy to stop goading the politicallyindependent ECB, Germany has failed to enforce a common line amongother euro states with top credit ratings.

Austrian Chancellor Werner Faymann floated an enhanced ECB rolelast week, as did Finnish Finance Minister Jutta Urpilainen. DutchFinance Minister Jan Kees de Jager declined to rule it out. Asholders of AAA ratings, the three are part of a German-led blocthat has set tough conditions for bailouts.

“We envisage a larger role for IMF,” De Jager said in Brusselstoday.

Europe is considering the backdoor way of involving the ECBafter failing to convince markets that it has found the rightrecipe for getting more muscle out of the government-guaranteedrescue fund, the 440 billion-euro European Financial StabilityFacility.

Recycling European money through the IMF would also be designedto encourage asset-rich emerging powers such as China to contributeto the European cause, the people said.

While the 17 euro-area finance ministers will meet tonight'sself-set deadline of working out how to leverage the rescue fund,the method is unlikely to unleash the targeted 1 trillioneuros.

De Jager spoke of bulking up the EFSF by a multiple of 2 to 2.5.With roughly 270 billion euros of EFSF funds uncommitted, thatwould put the bulked-up EFSF in the neighborhood of 675 billioneuros at most.

The first leveraging option, using the EFSF to insure 20 percentto 30 percent of new bond sales, faces a credibility test in themarkets and may not be ready until January. It also might splinterthe Italian and Spanish bond markets, by creating insured bondsthat are more attractive than bonds currently trading, the peoplesaid.

“The focus in Europe is very much on the political situation tosee if we're going to get another bailout package in some shape orform that takes us forward,” James Nixon, chief European economistat Societe Generale SA, told Ken Prewitt and Tom Keene on BloombergRadio's “Bloomberg Surveillance.”

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