Euro Zone Raises Lending Ceiling

It was revealed on Friday that the euro zone has raised the combined lending ceiling for the two bailout funds to 700 billion euros, from 500 billion. The news was announced by euro zone finance ministers in a statement, according to

. So where will that extra money come from? Well, 500 billion will come from the permanent bailout fund, the European Stability Mechanism, with 200 billion euros committed under existing bailout programs for Greece, Ireland and Portugal by the temporary European Financial Stability Facility (EFSF) fund. "The current overall ceiling for ESM/EFSF lending… will be raised to 700 billion euros," said the statement. “All together, the euro area is mobilizing an overall firewall of approximately 800 billion euros, more than 1 trillion dollars.” It had earlier been announced by Austrian Finance Minister Maria Fekter that they would be combining two rescue funds for a year to make more money available in the case of an emergency. She also said that the total figure is roughly 800 billion euros, although that figure may include money that has already been spent. "Obviously markets will only have confidence in us if we agree on a strong rescue fund," Belgian Finance Minister Steve Vanackere told reporters. "We can't consider that the crisis is over. We must find a good middle way between those who seek a (maximum) firewall and those who want it kept to a minimum." Steve Barrow, head of G10 strategy at Standard Bank in London, said that, “At the end of the day the key question is whether this new firepower is enough. Clearly if things turn down again, and especially if more bailouts are needed, the tricky issue of underfunding the ESM/EFSF relative to the potential bailout need is bound to resurface."