FINANCE ministers were struggling last night to set up a fund worth potentially hundreds of billions of euro to shore up countries in danger of going bankrupt.

In an attempt to see off speculators once and for all, they worked against a deadline of 2am this morning when the markets open in Japan. World leaders, including US President Barack Obama, added to the pressure as they are wary of the euro crisis spilling over.

Eurozone leaders at their emergency meeting on Friday night set finance ministers the task when the euro continued to slide despite the €110 billion Greek bailout, and Ireland, Portugal and Spain came under severe pressure from the markets.

But the obstacles to setting up the European fund – the main plank of their fight back – were immense as countries, including Britain and Germany, were concerned they would be drawn into paying the debts of stricken countries.

Tánaiste Mary Coughlan ruled out holding an early budget to deal with the soaring cost of borrowing as a result of the Greek crisis, which has effectively wiped out any fiscal progress made by Ireland in the past year.

The proposal would see the fund set up in two parts – one extending an existing pot used by the European Commission that has already been used to help Hungary, Romania and Latvia with their balance of payments problems.

They were closer to agreeing this first part of a euro stabilisation mechanism last night, but a lot of the details were still to be worked out, and it would be worth initially €60bn.

The second, and significantly much larger fund, however, was causing major headaches. This would ask member states to go guarantor for money to be raised on the open market to bail out countries having problems raising money on the open market.

The sums could be huge – possibly up to €1 trillion. Britain made it clear that it would not stand in the way of setting up such a mechanism but said it would not be part of it.

Irish diplomats emphasised that if the funds were set up, any country availing of them would have to agree to strict conditions.

Meanwhile, the International Monetary Fund yesterday approved a €30bn rescue loan for debt-stricken Greece, with €5.5bn being disbursed immediately to stem a crisis that has begun to threaten other eurozone members.

„Today’s strong action by the IMF to support Greece will contribute to the broad international effort underway to help bring stability to the euro area,” IMF managing director Dominique Strauss-Kahn said.

The combined €110bn Greek bailout package is the biggest in history. In return, Greece has had to commit to a painful package of spending cuts and revenue increases.

„While short-run output will necessarily contract as the economy adjusts, structural reforms should help to restore external competitiveness and, together with improved market confidence, set the economy on a recovery path,” said the IMF’s John Lipsky.

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EU finance ministers consider crisis fund to stave off bankruptcy threat

FINANCE ministers were struggling last night to set up a fund worth potentially hundreds of billions of euro to shore up countries in danger of going bankrupt.

In an attempt to see off speculators once and for all, they worked against a deadline of 2am this morning when the markets open in Japan. World leaders, including US President Barack Obama, added to the pressure as they are wary of the euro crisis spilling over.

Eurozone leaders at their emergency meeting on Friday night set finance ministers the task when the euro continued to slide despite the €110 billion Greek bailout, and Ireland, Portugal and Spain came under severe pressure from the markets.

But the obstacles to setting up the European fund – the main plank of their fight back – were immense as countries, including Britain and Germany, were concerned they would be drawn into paying the debts of stricken countries.

Tánaiste Mary Coughlan ruled out holding an early budget to deal with the soaring cost of borrowing as a result of the Greek crisis, which has effectively wiped out any fiscal progress made by Ireland in the past year.

The proposal would see the fund set up in two parts – one extending an existing pot used by the European Commission that has already been used to help Hungary, Romania and Latvia with their balance of payments problems.

They were closer to agreeing this first part of a euro stabilisation mechanism last night, but a lot of the details were still to be worked out, and it would be worth initially €60bn.

The second, and significantly much larger fund, however, was causing major headaches. This would ask member states to go guarantor for money to be raised on the open market to bail out countries having problems raising money on the open market.

The sums could be huge – possibly up to €1 trillion. Britain made it clear that it would not stand in the way of setting up such a mechanism but said it would not be part of it.

Irish diplomats emphasised that if the funds were set up, any country availing of them would have to agree to strict conditions.

Meanwhile, the International Monetary Fund yesterday approved a €30bn rescue loan for debt-stricken Greece, with €5.5bn being disbursed immediately to stem a crisis that has begun to threaten other eurozone members.

„Today’s strong action by the IMF to support Greece will contribute to the broad international effort underway to help bring stability to the euro area,” IMF managing director Dominique Strauss-Kahn said.

The combined €110bn Greek bailout package is the biggest in history. In return, Greece has had to commit to a painful package of spending cuts and revenue increases.

„While short-run output will necessarily contract as the economy adjusts, structural reforms should help to restore external competitiveness and, together with improved market confidence, set the economy on a recovery path,” said the IMF’s John Lipsky.

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