Euro bailout fund will be $1.1 trn: Austria

Austria's Finance Minister Maria Fekter says the 17 euro countries will build a 800 billion euro ($1.1 trillion) financial firewall against their debt crisis, though 300 billion euro ($400 billion) of that has already been used for previous bailouts.

That gives the euro-zone some 500 billion euro in fresh money to help debt-ridden countries. Fekter said yesterday Friday that this figure should send a convincing message to financial markets and the euro-zone's international partners that the currency union can contain its two-year-old debt crisis.

The euro-zone is under pressure to build a strong defense against further financial problems among its members. Some 300 billion euro in financial help has already been used to bail out Greece, Ireland and Portugal. Many economists fear that without a sufficiently large financial safety net, big economies like Italy or Spain could also come under threat.

While the 800 billion euro ceiling is much higher than the 500 billion euro limit that had been agreed last year, it still falls short of the 1 trillion euro that international institutions like the International Monetary Fund and the Organisation for Economic Cooperation and Development had suggested.

To ease the transition from the euro-zone's interim bailout fund, the European Financial Stability Facility, to its new rescue vehicle, the European Stability Mechanism, some 240 billion euro left in the EFSF will remain available until mid-2013.

The ESM is supposed to come into force in July. Fekter said that allowing the two funds to run in parallel for one year will give the euro-zone time to build up the ESM closer to its full 500 billion euro capacity.

The ESM depends on a 80 billion euro capital base, which is backed bu by 620 billion euro in guarantees from its member governments, which it can then use on the financial markets to raise money. The capital base will be paid into the ESM in several installments until 2014.

However, Fekter stressed that the 240 billion euro that is still left in the EFSF could only be used as a last resort and if agreed by all the euro countries.