OECD head calls for €1 trillion bailout fund

Eurozone bailout funds need to be increased to at least €1 trillion (£836.3 billion), the head of the Organisation for Economic Cooperation and Development (OECD) argues.

Angel Gurría, secretary general of the international economic organisation, says the €440 billion European Financial Stability Facility (EFSF) is not large enough to restore market confidence.

Gurría also claims a stronger financial firewall would give eurozone governments room to concentrate on restoring growth and competitiveness to the region.

The temporary EFSF is due to expire in June 2013 and will be replaced by the permanent European Stability Mechanism (ESM), which has a lending capacity of €500 billion and comes into operation this summer.

However, proposals to operate the two funds in parallel for longer have been met with resistance from some of the funds’ largest contributors, especially Germany.

Gurría says: “Weak financial conditions, fiscal consolidation and economic adjustment are restricting demand in the short-term before the long-term benefits on stability and growth are felt.

“Decisive action to restore confidence and support demand is needed now.”