Eurozone bites wider bailout bullet

Europe bit the bullet on Monday with talk of boosting its debt rescue fund, but Greece was kept waiting for the return of auditors who have the keys to funds it needs to avoid default.

The news followed intense debt diplomacy in Washington, where the IMF, the United States and other G20 economies pressured Europe to ring-fence bigger risks such as Italy - and prevent the world slipping into a fresh recession.

Markets rose on the signs of a step-change, including bank shares in anticipation the plan would include a hefty recapitalisation component.

"We are thinking about the possibility of giving the EFSF greater leverage, to give it greater strength," said European Union economic affairs commissioner Olli Rehn, referring to the 440 billion euros ($A610 billion) European Financial Stability Facility.

That admission, in a German newspaper interview, was amplified by Rehn's spokesman Amadeu Altafaj who later said in Brussels that "the increase of the means at the EFSF's disposal are under discussion", in a change of pace.

Ten days ago in Poland, US Treasury Secretary Tim Geithner urged eurozone finance ministers to ramp up their bailout fund, created after last year's 110 billion euro Greek rescue, and since tapped by Ireland and Portugal.

Geithner was given short shrift then, with eurozone leaders struggling to ratify changes to the fund's operations, conclude a second Greek bailout for another 159 billion euros and convince investors Italy will not need help too.

Press reports and rumours given credence by analysts suggest the fund's size could stretch ultimately as high as two to three trillion euros, depending on the mechanism chosen and the extent of European Central Bank backing.

The International Monetary Fund may also be hoping to increase its financial resources from $US940 billion ($A960 billion) to at least $US1.3 trillion, after managing director Christine Lagarde spoke of a need for "contingency options".

The European Commission refused to enter into a numbers game on the speculation, Dutch Prime Minister Mark Rutte insisted there were no "plans" yet and Austrian finance minister Maria Fekter said taxpayers should be spared.

Stock markets in London, Paris, Frankfurt, Madrid and Milan rose - the last of these by more than 3.0 per cent - on speculation the French government was drawing up plans to recapitalise its ailing banks, but the euro fell.

For analysts Capital Economics, "talk of radical new measures" to bail out governments and eurozone banks "suggests that policymakers might finally be considering the bold steps that would be required to save the euro".

But others were more cautious, RBC FX Strategy warning of "critical EFSF votes" first in Slovenia on Tuesday, Finland on Wednesday and Germany on Thursday, and adding: "It would be premature to think the solution is ready."

Slovak hardliners in coalition government are also threatening new obstacles before passing the changes, demanding that countries asking for loans from the rescue fund deposit assets as collateral, such as "state-held shares".

The absence of a date when international auditors will return to Athens, to recommend whether to release eight billion euros in blocked loans means the issue may go to EU leaders at their next summit, on October 17 and 18.

The Greek authorities have yet to convince creditors that they can fix a "budgetary hole" in their public finances for 2011-12, or successfully implement a vast privatisation scheme demanded by bailout partners.

Greece may announce a number of privatisation deals this week, a senior official said, including the extension of an operating lease on Athens International Airport and a concession for a gaming monopoly and lotteries.

Designed to lighten Greece's crushing debt of more than 350 billion euros by one seventh, the program has long been shrouded in doubt due to missed deadlines, a poor track record in meeting promises and collapsed share prices.