Eurozone finance ministers meeting in Brussels have agreed ways to boost the strength of Europe's bailout fund and have raised the possibility of the IMF getting more resources in order to help eurozone countries that may be struggling to raise funds on the international markets.
Following a five-hour meeting, ministers also agreed to release the €8bn Greece needs to avoid bankruptcy and took the first steps to approve the next €8.5bn tranche of Ireland's bailout.
The release of the funds follows the fourth review of the Irish rescue programme by the troika of the European Commission, the International Monetary Fund and the European Central Bank.
The disbursements will come from the two main pillars of the EU rescue mechanism and the IMF.
Ministers tonight approved the European Financial Stability Facility element of the funds, while the European Financial Stability Mechanism (EFSM) element should be approved tomorrow.
Both will amount to €4.2bn.
The IMF is expected shortly to approve its €3.8bn share of the bailout, while €500m will come from the UK.
The monies are expected to be disbursed in January 2012.
Finance ministers agreed that the IMF should be given further resources through bilateral loans so the fund could step in with support to countries such as Italy and Spain, whose debts and borrowing costs would presently overwhelm the eurozone's existing resources.
The idea of boosting the IMF was discussed at the G20 summit in Cannes earlier this month.
Minister for Finance Michael Noonan said it would be another ten days, when EU leaders hold their summit, when what he called "the serious issues" will be decided.
Arriving at the meeting, Mr Noonan said at this stage it was hard to distinguish fact from rumour, but tonight's meeting was focused on a report on Greece and expanding the EU bailout fund.
On the question of the ECB intervening heavily in the markets and buying-up bonds, he said it appeared not legally possible for the ECB to operate in the same fashion as the Bank or England or the US Federal Reserve.
However, he added that it would be assessed as to whether there was a "safe legal route for doing so".
Finance ministers also discussed details for the European Financial Stability Facility to enable it to help Italy or Spain if needed.
Detailed guidelines for the EFSF are said to be ready for approval by the ministers, opening the way for new operations and multiplying the fund's size.
The guidelines should clear the way for the €440bn facility to attract cash from private and public investors in coming weeks.
The bailout fund will also be able to offer partial protection for private investors on their purchases of eurozone sovereign bonds, like those of Spain or Italy, at primary auctions.
It is hoped that this will help boost demand and lower sovereign funding costs.
Banks face subordinated debt downgrade
Meanwhile, international ratings agency Moody's has warned it could downgrade the subordinated debt of 87 banks across 15 European Union nations.
The agency said the downgrades would be on concerns that governments would be too cash-strapped to bailout holders of riskier bank debt in times of stress.
Moody's said the greatest number of ratings to be reviewed were in Spain, Italy, Austria and France. No Irish banks are listed.
Moody's also warned that the risk to ratings could extend outside the borders of the EU to 'other closely integrated markets' such as Norway or Switzerland.
Cost of Italian three-year bonds rises
Separately, Italy paid sharply higher borrowing costs in an auction that raised €7.49bn, as markets continued to pressure the eurozone's third largest economy to come up with urgent reforms.
Yields on three-year bonds skyrocketed to 7.89% in today's auction, a full 2.96% higher than last month.
However, Italy easily sold the maximum €3.5bn.
Yields on ten-year bonds rose to 7.56%, up 1.5% from a month earlier. The Treasury sold the maximum €2.5bn.
The results will likely ramp up pressure on new Prime Minister Mario Monti, who has assembled a government of experts tasked with drafting speedy new austerity measures followed by deeper reforms.
