France wants the eurozone's debt rescue fund raised to around one trillion euros ($1.3 trillion), Finance Minister Francois Baroin said on Thursday, a day before ministers meet to find a compromise. "That is the position I will defend in the name of France," Baroin said on BFM Business radio, although German Chancellor Merkel has spoken only of a possible increase to 700 billion euros.
After months of fraught negotiations and international pressure, eurozone ministers gather in Copenhagen on Friday for a two-day meeting to find an agreement on increasing the bloc's debt rescue fund. Amid renewed worries about Spain ability to rein in its deficit, they aim to create a firewall big enough to keep speculators at bay following bailouts of Greece, Ireland and Portugal.
The Group of 20 leading economies and the IMF have warned that they would offer help to the eurozone only if the 17-nation bloc builds up its rescue fund. Germany, the biggest contributor to the bailouts, has indicated it would agree to combine the future permanent fund, the 500-billion-euro European Stability Mechanism (ESM), with the sums from the temporary European Financial Stability Facility (EFSF) already committed to the three bailed out nations.
This would give the eurozone 700 billion euros on paper, but in reality it would have 500 billion euros on hand to help other nations since the rest is already slated for Greece, Ireland and Portugal. Another suggestion has been to keep the EFSF active, which would give the eurozone another 240 billion in available rescue funds. "The firewall, it's a little like the nuclear option in military planning, it's there for dissuasion, not to be used," said Baroin. "We naturally want that it to be as high as possible," he said, because "the higher the firewall, the less is the risk fragile countries will come under attack on the markets, by speculators at least."
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