Italy and Spain call for eurozone rescue fund booster

By Ambrose Evans-Pritchard, International business editor
8:52PM GMT 22 Jan 2012

Political leaders in Italy and Spain have called for a massive boost to the EU rescue fund and a blast of monetary stimulus by the European Central Bank (ECB), putting them on a collision course with Germany over the handling of the eurozone crisis.
Italy's premier Mario Monti has told Berlin that the new European Stability Mechanism (ESM) must be doubled to €1 trillion (£828bn) to restore investor confidence in southern European debt, according to Der Spiegel.

The move comes days after Mr Monti warned German Chancellor Angela Merkel that austerity fatigue is growing in the debtor states and there will be a "powerful backlash" unless the creditor powers led by Germany do more to correct North-South imbalances and lower borrowing for the whole eurozone.

In what appears to be a coordinated move by the Latin bloc, Spanish foreign minister José Manuel García-Margallo y Marfil backed the plan for a bigger rescue fund. He called for an EMU debt union and sweeping changes to the structure of the eurozone.

Mr García-Margallo exhorted the ECB to step up bond purchases in a fully-fledged campaign of quantitative easing, implicitly suggesting a blitz of up to €2 trillion on top of the unlimited credit already provided to banks at 1pc for three years.

"The European Central Bank can do much more than it has done: it has bought European debt equal to just 2pc of GDP while the Bank of England has done 20pc," he said.