Forex News – Euro zone finance ministers agree to boost bailout fund

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The first day of the Ecofin (Euro-zone finance ministers meeting) today was a success  after an agreement was reached to boost the size of the firewall designed to contain the spread of the euro zone  debt crisis.

What was achieved was to effectively combine the two rescue funds, the temporary European Financial Stability Facility and more permanent European Stability Mechanism which comes into effect in July . By allowing the two funds  to run in parallel, this results in bolstering the euro zone firewall to approximately 800 billion euros, from a previously planned 500 billion. A total of 200 billion euros in funds already committed to Greece and other bailout countries

Basically the EFSF will be used as a buffer to the ESM, as this buffer will be needed because when the ESM begins operating this July  it will not have sufficient paid in capital which means that the EFSF can be relied upon to make up any shortfall.