EU Plans Boost in Bailout Ceiling

Temporary increase above $1 trln gives Germany political cover, aims to attract outside help.

The European plan to temporarily increase the bailout-aid ceiling above $1 trillion marks a compromise that gives German officials political cover at home and aims to attract more outside help, euro-area officials say.

While European finance ministers are nearing an agreement tomorrow to raise the limit on rescue funds to 940 billion euros ($1.3 trillion) until mid-2013, the amount they will be able to deploy immediately to protect Spain and Italy will range between 340 billion euros and 640 billion euros.

Footnote

In a sign of the political sensitivities, the draft doesn’t spell out the 940 billion-euro figure. It puts the total capacity at 700 billion euros from mid-2012 to mid-2013 and relegates the possible use of the EFSF’s remaining 240 billion euros to a footnote.

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