EU sets up crisis fund; ECB ups capital

 

European Union leaders have agreed to create a permanent financial safety net from 2013 and the European Central Bank moved to increase its firepower to fight the debt crisis that has rocked the euro zone.

But at Germany's insistence, the 27 leaders said the long-term crisis-resolution mechanism, to be added to the EU's governing treaty, would only be activated "if indispensable to safeguard the stability of the euro as a whole."

They also decided there was no need to increase an existing temporary rescue fund, which some analysts say could be insufficient if Spain and Portugal need EU/IMF bailouts after Greece and Ireland, nor did they discuss using it more flexibly.

The decision not to enlarge or even discuss enlarging the existing fund could be taken by financial markets as a sign of division, potentially provoking more market uncertainty.