The European Union has agreed to raise its so-called “firewall” to a total of €700 billion, an increase of 40% over its previous maximum but still short of a hoped-for total of €1 trillion. The new total represents the sum of the European Stability Mechanism’s (ESM) €500 billion permanent fund and the European Financial Stability Fund’s (EFSF) €200 billion temporary fund.
In reality, the EFSF funds have already been allocated, not including the latest €103 billion bailout of Greece. The EU’s total commitment is more than €800 billion, or about $1.07 trillion. The ESM fund won’t be fully capitalized until 2014, but there is a mechanism in place that could trigger quicker payments in the event cash is needed more quickly.
Beginning in July, the ESM will begin financing new programs to try to keep the fiscal problems of Greece, Ireland, Portugal, Spain, and Italy from infecting the rest of the Eurozone members. The Eurozone has also committed to contributing another €150 billion to the International Monetary Fund.
The text of the EU’s statement is available here.