EU could boost funds of new crisis mechanism: Belgium

The European Union could pump more money into a permanent crisis mechanism that will replace a temporary, 440-billion-euro fund that expires in 2013, the Belgian finance minister said Wednesday.

EU heads of state and government on Thursday start a two-day summit to decide on limited changes to the bloc’s treaty so as to allow setting up a permanent financial backstop to prevent future debt crises.

“This permanent stability mechanism that we will discuss on Thursday and that we will put in place in the coming days could in fact be bigger,” Belgian Finance Minister Didier Reynders, whose country holds the rotating EU presidency until December 31, told Le Soir newspaper.

The three-year temporary fund, worth one trillion dollars in all when combined with other instruments, was put in place after a Greek bailout but analysts warn that it may not be enough if Portugal and Spain require help.

“Today, some ask after helping Ireland and Greece, ‘will we have enough money for Portugal and Spain?’ I am not saying that we will have to help these countries. But we shouldn’t have to ask ourselves the question,” Reynders said.

“It would be absurd to have made so much effort and be caught up by a default in one country,” he added.

Germany, Europe’s biggest economy, says it is too soon to talk about boosting the fund.

Reynders said the money committed to the temporary European Financial Stability Facility (EFSF) is six or seven times less than what was offered to banks during the global financial crisis.

“It seems easier for states to put money on the table to save their banks than help another country, yet the goal is always the same — to protect savings account holders,” he said.