Efforts to resolve the two-year-old European debt crisis swungback to world leaders after euro-area officials boosted a firewalldesigned to overcome doubts about their crisis response and to lureadditional emergency aid.

Finance ministers from the 17-member monetary union unveiled apackage over the weekend that included 500 billion euros ($667billion) in fresh bailout funds on top of 300 billion euros alreadycommitted to rescue programs, which together topped the symbolic $1trillion mark. The total doubles when more than 1 trillion euroslent by the European Central Bank to aid the region's banks isincluded.

“The political commitment to the euro zone is increasinglyclear, and the ECB has shown that, in the final analysis, they'lldo what they have to do,” Erik Nielsen, chief global economist atUniCredit SpA, wrote in a note yesterday.

Group of 20 nations that rebuffed German-led pleas for more aidin February will be asked to decide this month whether Europeanleaders have done enough to warrant increased resources from theInternational Monetary Fund. Euro-area finance ministers insistedat a meeting that ended March 31 in Copenhagen that they'vefulfilled their side of the bargain.

“Europe has done its part” and that augurs well for talks at theIMF spring meeting on April 20, French Finance Minister FrancoisBaroin said at the meeting in the Danish capital.

European stocks were initially buoyed by the news today, withthe Stoxx Europe 600 Index adding as much as 0.6 percent beforesliding 0.7 percent at 10:54 a.m. in Frankfurt. The euro climbed0.1 percent to trade at $1.3362.

IMF Managing Director Christine Lagarde said March 30 thatEurope's upgraded strategy will “support the IMF's efforts toincrease its available resources for the benefit of all ourmembers.” The same day, the U.S. Treasury said that Europe'sdecision on financing will “strengthen confidence.”

“Today's announcement by the Eurogroup reinforces a trajectoryof positive efforts to strengthen confidence in the euro area,” theTreasury said in a statement in Washington.

Italian Prime Minister Mario Monti, speaking today at aconference in Hainan, China, said he “very much appreciated”China's support for the euro. He urged the audience to “relax a bitabout the eurozone crisis,” which is “being overcome.”

First-Quarter Agreements

With finance ministers offering differing arithmetic to defendthe firewall, it was unclear whether emerging nations includingChina and India would be persuaded to help bolster the IMF'santi-crisis war chest at the fund's meeting.

The weekend gathering capped a first quarter in which euro-arealeaders agreed on a fiscal treaty outlining new budget rules,completed a second bailout program for Greece and bolstered theirbailout funding. Along with the ECB's three-year loans, theactivity helped to ease borrowing costs in the monetary union andcalm markets.

Even as euro officials pledged to exploit the time they'vebought with the measures, German Finance Minister WolfgangSchaeuble criticized an excessive focus on the volume of bailoutfunding at the expense of structural overhauls like budget cuts andlabor market changes.

“My irritation over a lot of stupid talk over the last few dayshas to do with the fact that it's as if only the firewall isimportant,” Schaeuble told reporters in Copenhagen March 30. “Youcould have put in 10 trillion, but if you don't solve the problem,it's worth nothing.”

The meeting featured a spat as to which European minister wouldpresent the package to the media. Austria's Finance Minister MariaFekter later apologized for speaking before a scheduled pressconference.

The increased euro firewall derives from the ability of the 500billion-euro European Stability Mechanism, the euro area'spermanent rescue fund scheduled to go into operation from July, touse its full capacity. Had ministers not acted, that figure wouldhave been reduced by funds already committed by the temporaryEuropean Financial Stability Facility.

The new fund's firepower fell short of a draft proposal to topit up with some 240 billion euros in EFSF funds not yet committed.Instead, that amount will only be used to ensure that the permanentESM can lend its full 500 billion euros before it becomes fullyresourced in two years.

The compromise was forced by a group of German-led creditorcountries that balked at a potential 940 billion euros of bailoutfunds, saying that such a sum couldn't be justified to theircountries' lawmakers and taxpayers.

Bolder Action

“Finland is ready to increase the capacity, but 940 billion isnot possible for our side — it's too high,” Finnish FinanceMinister Jutta Urpilainen said on March 30.

It's questionable whether the lesser amount will win overinvestors and G-20 leaders who have demanded bolder action from theeuro area, according to Malcolm Barr, an economist at JPMorganChase & Co. in London. He said the funding was still too meagerpotentially to rescue Italy and Spain, which have combinedborrowing needs of 800 billion euros in the next three years — orto deal with additional bank recapitalizations.

Europe's move “is likely to be a disappointment not only to somewithin the euro area, but also to those outside who wanted to see'the color of European money' before being prepared to commit moreresources to the IMF,” Barr said yesterday in an e-mailed note.

At a meeting in Mexico City in February, the G-20 said that aEuropean review of its backstop funding is “essential” before anyconsideration of bulking up IMF resources. Officials at thatmeeting, including those from Japan, Brazil, Russia and the U.K.,sided with the President Barack Obama's administration, which hassaid that Europe is rich enough to do more.

Euro-region national central banks plan to steer 150 billioneuros to the IMF as a down payment toward other countries chippingin. That sum was left out of Europe's firewall calculation becauseit would be managed by the global powers that run theWashington-based IMF.

Bloomberg News