Eurozone leaders meeting at a critical summit in Brussels have agreed two options to expand the EU's bailout mechanism, according to draft documents seen by RTÉ News.
As expected the two options involve the bailout fund - the EFSF - being used to insure a portion of a bond issuance against future losses, as well as the creation of a special mechanism to allow third party investors to purchase the bonds of vulnerable European economies, such as Italy and Spain.
Leaked documents indicate that eurozone leaders are close to agreeing how to boost the firepower of the EFSF in order to provide a firewall against contagion from Greece sweeping through the eurozone.
According to a draft conclusion of the summit - which has yet to be finalised - there is no figure attached to the expanded fund, but a senior EU source told RTÉ News that it would probably be just over €1 trillion.
Eurozone leaders will invite finance ministers to work out the fine detail of the two options - insuring sovereign bond issuances, and a special purpose vehicle to attract private and public wealth funds - probably through the offices of the International Monetary Fund.
The conclusions also declare that eurozone leaders are pleased with the progress made by Ireland in the full implementation of its adjustment programme, which is delivering positive results.
Earlier the European Banking Authority said a number of big banks across the EU would need €106bn to bring their core capital ratios to 9% by next June.
Minister for Finance Michael Noonan tonight welcomed the fact that Irish banks are not among those needing extra capital.
It is understood talks are now under way between the French and German leaders and a delegation of international banks on what kind of losses should be imposed on Greece's creditors.
There are other key issues being negotiated tonight as well.
Officials expect Germany to recommend that the European Commission be given a much more intrusive role in monitoring member states' economic policies beyond what was agreed in recent EU legislation.
Meanwhile, the Netherlands would like to give the Commissioner for Economic Affairs more powers to make a more direct intervention in countries which are in breach of deficit rules - at present that is the case for 25 out of 27 member states.
Italy's package of reform
Also weighing on the summit is deep concern about Italy.
Under huge pressure from its eurozone partners, Italy has promised a package of reform steps to boost growth and control its public debt, including labour and pensions reforms and additional revenues from property divestments.
In a letter sent to the summit in Brussels, the government said it would produce a plan of action to boost growth by 15 November.
It promised to raise the retirement age to 67, to cut red tape and modernise state administration to improve conditions for business and to raise €5bn a year from divestments and improved returns from state property.
Italy's inability to deliver a substantive plan for reforming its pensions system has raised doubts about Prime Minister Silvio Berlusconi's seriousness in tackling a crisis that threatens the eurozone's third largest economy.
Italy has the eurozone's largest sovereign bond market, with a public debt of €1.8 trillion, 120% of GDP.
If it went the same way as Greece, Ireland and Portugal, the rescue fund would not have enough money to bailout Italy.
Back home, the Dáil is to sit next Wednesday and Thursday to discuss the crisis in the eurozone.
