G20 Inches Toward $2 Trillion in Rescue Funds for Europe

Germany is easing its opposition to a bigger European bailout fund, officials said, smoothing the way for the world's leading economies to secure nearly $2 trillion in firepower to prevent further fallout from the euro-zone's sovereign debt crisis.

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Finance leaders from the Group of 20, meeting in Mexico City this weekend, are trying to build up massive international resources by the end of April to convince financial markets they can prevent the euro-zone's deep problems from inflicting more damage on a still-fragile world recovery.

It would mark their boldest efforts since 2008 when the G20 mustered $1 trillion to rescue the world economy from the credit crisis, which blew up in the United States and caused the worst recession since the 1930s.

They are demanding that Europe build up its war chest first and then other G20 countries would contribute extra money to the International Monetary Fund.

As Europe's richest economy, Germany's support for a larger European fund is critical.

A senior G20 official said Berlin was prepared to discuss boosting the firewall in March, but it saw no reason to increase the bailout fund for now because the situation in financial markets has been improving.

The plan is to merge Europe's temporary and permanent bailout funds, the European Financial Stability Fund and the European Stability Mechanism , to create one 750 billion-euro ($1 trillion) fund. Increased IMF resources would back that up.

"Everyone in the euro zone and even in European Union is reasonably happy with combining the ESM and the EFSF, even Germany, but it is too early to say if this will be decided at the EU summit at the beginning of March," said Margrethe Vestager, economy minister of current EU president Denmark.

Merging the funds would mark a softening of Berlin's stance. It has warned that a bigger fund would remove pressure on deeply indebted countries to enact the tough fiscal measures and economic reforms needed to bring their budgets under control.

G20 finance chiefs are piling the pressure on Germany as they try to line up the roughly $2 trillion in resources by the time they next meet in April and draw a line under the two-year-old euro-zone crisis. Read more