Rescue Fund can be increased, Reynders said in a break with Merkel

Belgian Finance Minister Didier Reynders said the euro region could increase the size of its 750 million euros ($ 1 billion) rescue fund, breaking ranks with German Chancellor Angela Merkel and Nicolas Sarkozy of France.

Reynders told reporters in Brussels that the current joint account may be higher if governments decide to create a larger pool as part of a mechanism of permanent crisis in 2013. "If we decide that in the coming weeks or months, why not apply immediately to current installation?

European officials are under pressure to find new ways to stop the contagion spreads from Greece and Ireland amid concerns the rescue package may not be large enough to rescue Spain if necessary. While Sarkozy and Merkel rejected the extension of the fund on 25 November, the European Central Bank President Jean-Claude Trichet said yesterday the government should consider only as a movement.

The International Monetary Fund also supports increasing the plant after 2013, Reynders said at the end of a week that saw the Belgian bond spreads jumped to the highest in at least 17 years.

"The IMF is in favor of a larger mechanism," said Reynders, who said the fund is not necessary to increase immediately. "They are ready to continue the process if we decide in Europe."

IMF spokesman William Murray declined comment. Managing Director, Dominique Strauss-Kahn, is scheduled to join a regular meeting of ministers of finance euro region in Brussels on 6 December.

Reynders said the ministers discussed the prospects of Portugal, which is struggling to clear the speculation will also need a bailout.

"I said two weeks ago that is very necessary for Spain to seek help," he said. "Now we have to find a remedy to Portugal to see it is necessary or not, but to avoid infection. We will continue in the coming weeks and months."

Trichet Challenge

Reynders comments at a time when Trichet challenges political leaders to do more to set their budgets and end with a sovereign debt crisis is bounced through the European markets for over a year. Asked about increasing the size of the cash pool yesterday, said "everything they do must be proportionate to the size of the challenges."

"This is true in all aspects, both qualitative and quantitative," said Trichet. "They have to go as far as possible and be as efficient as possible."

A loss of market following the rescue of Ireland last week pushed the ECB in a new wave of bond purchases.

The extra yield investors demand to hold bonds Portuguese 10-year German bonds fell yesterday below 300 basis points for the first time since August after hitting 428 basis points on November 29. Ireland's performance in 10 years fell 30 basis points to 8.2 percent yesterday and the Spanish 10-year yield, which reached 5.67 percent on Nov. 30, closed at 5.1 percent.

Contagion

Belgium premium 10-year bond rose to 133 basis points on November 30.

"The difficulty we have is like other countries of Europe: we have to solve the problem of contagion from Greece, Ireland and Portugal, now maybe," said Reynders. "We have no real problem in Belgium at the moment like that."

The worsening of the crisis this week prompted Spain to push for more measures to cut its budget deficit just a week after saying it would not be necessary.

Spain yesterday Cabinet raised taxes on snuff and set a date for pension reform. Two days earlier, the government said it plans to raise about 14 billion euros ($ 18,400,000,000) from the sale of shares in the airport operator and the lottery company.

Ending

"The time is over, we have been talking for months," said Deputy Prime Minister Alfredo Perez Rubalcaba, referring to the pension plan. "We will work even harder to reach agreements."

EU ministers are hammering a mechanism of permanent crisis that was created in 2013 and also include a rescue fund.

"The permanent mechanism should be with a huge amount of money - if not organized, there's always speculation whether it is sufficient for one, two or more countries," said Reynders. "At the moment, next week will be discussion on approving the plan for Ireland and then have some information on the situation in Portugal."