> Home > Blog > EU News > Pressure grows on European bailout fund on fears it`s too small if Spain goes
>  Blog
Pressure grows on European bailout fund on fears it`s too small if Spain goes
Date 08/04/2011 18:00  Author webmaster  Hits 975  Language Global
08 APR 2011

Pressure for the eurozone to sign off an improved rescue fund is mounting following Portugal's decision to apply for a bail-out.

By Philip Aldrick

Concerns have been raised because the current European rescue fund is not big enough to prop up Spain, which is expected to move into the bond market's gunsights now that Portugal has caved in.

Last year, a €750bn (£657bn) package was agreed – made up of €440bn from the European Financial Stability Facility (EFSF), €60bn from the European Financial Stability Mechanism (EFSM), and €250bn from the International Monetary Fund (IMF).

The scheme was devised to provide beleaguered nations vital funding at lower interest rates than they would be able to secure in the markets. However, €67.5bn has already been committed to Ireland and up to €90bn more for Portugal.

In addition, it has since emerged that only €250bn of the EFSF facility – which is backed solely by eurozone nations – can be used. Above €250bn, the EFSF's gold-plated AAA credit rating would be cut, undermining its purpose by making the emergency funding less affordable.

Spain's funding needs for the next three years are about €400bn, Citi said. Added to which, Spanish banks may need to be recapitalised with as much as €70bn, Deutsche Bank estimates.

Read entire article

See also:
Spain's tough stance makes it different from the rest (Telegraph)