Eurozone finance ministers meet Monday divided over growing calls to expand a debt rescue fund to bury market fears about the fate of vulnerable countries such as Portugal and Spain.
The debate has ranged from a suggestion by Belgium to double the fund's size to 1.5 trillion euros ($2.0 trillion) to a proposal to give the system the power to buy bonds from struggling eurozone countries.
European Commission president Jose Manuel Barroso has urged EU leaders to take a decision by their next summit in February but faces resistance from eurozone paymaster Germany.
"I expect top German politicians to respect the role of the commission. We in the commission have not only the right, but also the duty, to tell Europe's citizens what we think is right," Barroso told Germany's Spiegel magazine.
|Eurozone finance ministers are set to meet divided over growing calls to expand a debt rescue fund to bury market fears about the fate of vulnerable economies such as Portugal and Spain|
Germany insists that the 750-billion-euro financial safety net is large enough and says only one-tenth has been used so far to rescue Ireland from a banking catastrophe in November.
"I do not understand Barroso's comments. If only a small part of the fund has been used, then there is no need to discuss making it bigger," German Foreign Minister Guido Westerwelle said in the Tagesspiegel am Sonntag weekly.
But analysts have repeatedly warned that the fund would be too small to come to the rescue of bigger economies such as Spain, amid fears that Portugal could be next to fall into the financial abyss and drag its neighbour with it.
The eurozone won some breathing room last week after Portugal and Spain successfully raised funds on the bond market, but analysts say their interest rates could still rise to levels that would require bailouts.
Belgian Finance Minister Didier Reynders wants the safety net to be doubled and said he would raise the issue at the meeting of finance ministers Monday and Tuesday in Brussels, although no decision is expected.
French Finance Minister Christine Lagarde said one idea under discussion would allow the fund to buy the debt of struggling governments on the secondary market, claiming a role that the European Central Bank has reluctantly taken.
The fund was created last year to protect the euro from market upheaval after Greece became the first eurozone country to be bailed out due to its huge public deficit and debt load.
The system combines a 440-billion-euro European Financial Stability Facility (EFSF) backed by guarantees from the 17 eurozone countries, plus 250 billion euros from the IMF and another 60 billion euros from the 27-nation EU.
But the EFSF's effective lending capacity is estimated at only 250 billion euros as the fund borrows money on the markets and, in order to secure a top rating and low interest rates, it must keep part of funds raised in reserve.
Although German officials oppose expanding the fund, German Finance Miniser Wolfgang Schaeuble indicated that increasing the EFSF's effective lending capacity may be necessary.