The euro zone may raise the combined lending power of its bailout funds to close to Euro 700 billion from Euro 500 billion in a trade-off between German opposition to committing more money and calming markets, euro zone officials said.
Euro zone finance ministers and central bankers will discuss the size of their bailout funds — the temporary European Financial Stability Facility (EFSF) and the permanent European Stability Mechanism (ESM) in Copenhagen on March 30-31.
The Euro 440-billion EFSF and the Euro 500-billion ESM now have a combined lending ceiling of Euro 500 billion, which means that in the 12 months from July 2012 when they co-exist, they cannot lend together more than Euro 500 billion.
Markets have long been pushing for a higher capacity for euro zone lending to make sure the 17-nation bloc has enough money to bail out even its large members like Italy or Spain, should that be necessary, but Germany has been adamantly opposed to such an increase.
"Given that the situation is difficult in several countries, it seems to me the easiest option is the least ambitious one," one senior euro zone official said.
Out of its Euro 440 billion of lending power, the EFSF has already committed Euro 192 billion to bailouts for Greece, Ireland and Portugal.
"One possibility would be to say the EFSF has made commitments of Euro 192 billion, but the ESM should start fresh with 500," the senior euro zone official said.
"The combined lending capacity would go from Euro 500 billion to Euro 692 billion, roughly Euro 700 billion. That is one of the options under discussion and that is probably the least ambitious and therefore politically the easiest," the official said.
A second euro zone official confirmed this was a likely solution, although both noted several options were being examined and the final decision was still uncertain.
