Governments can increase the size of the European Union-led bailout fund if necessary to restore confidence in the euro, says European Central Bank council member Axel Weber.
"Seven hundred and fifty billion should be enough to assure the markets," Weber said. "If not, it will have to be increased."
At
worst, the fund would need another €140 billion ($245 billion), an amount that would not jeopardise the survival of the euro, he said.
Contagion from Europe's sovereign debt crisis is spreading to Spain, sparking concern that the bailout fund set up in May is not large enough to rescue the euro region's fourth-largest economy.
But Commerzbank analysts said governments could face domestic resistance to a top-up request.
Spain's economy is almost twice the size of those of Portugal, Greece and Ireland combined. Deputy Finance Minister Jose Manuel Campa said yesterday the country's funding position for the rest of the year was "comfortable".
The European Union and the International Monetary Fund established the €750 billion fund in May after Greece's near-default threatened the survival of the currency.
Klaus Regling, who runs the largest part of the fund, told newspaper Bild it was large enough for all member states.
But Weber said that if Greece, Ireland, Portugal and Spain were unable to refinance government debt - something he considers inconceivable - rescue funds of €1.07 trillion would be needed. About €925 billion had been committed through the €750 billion rescue fund, the €110 billion Greek aid package and the €65 billion of ECB bond purchases, leaving a shortfall of about €140 billion.
- Bloomberg
