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EU works to contain Greek crisis

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Greek Finance Minister Evangelos Venizelos waits for the start of a round table meeting of eurozone finance ministers in Luxembourg on Sunday, June 19, 2011. (AP) Greek Finance Minister Evangelos Venizelos waits for the start of a round table meeting of eurozone finance ministers in Luxembourg on Sunday, June 19, 2011. (AP)

LUXEMBOURG (AP) — Europe sought Monday to put a firewall between the dire financial situation of Greece and the destiny of Ireland and Portugal, the two other countries that have already received international aid.

The region's finance ministers signed off on important changes to both its current and future bailout funds, which they hope will reinforce confidence in the eurozone's struggling economies as the debt crisis in Greece was reaching a new boiling point.

The ministers agreed to raise their guarantees for bailout loans given out from the current rescue fund to euro780 billion($1.1 trillion) from euro440 billion, said Klaus Regling, who manages the Luxembourg-based fund. That will allow the fund to lend out a total of euro440 billion, up from about euro250 billion currently.

The European Financial Stability Facility, as the fund is known, requires significant over-guarantees to get a good credit rating and make the bonds it issues attractive to investors.

On top of that, the ministers also made an important tweak to their future rescue fund, which they hope will help already bailed out countries regain access to debt markets.

The so-called European Stability Mechanism, which will come into force in mid-2013, when the EFSF expires, will not have preferred creditor status when it helps countries that have already been bailed out, said Jean-Claude Juncker, the Luxembourg prime minister who also chairs the meetings of eurozone finance ministers.

Having preferred status means the fund would be repaid before any private creditors. That had been harshly criticized by many economists, who said it would deter banks and other investment funds from lending any money to already struggling countries.

Copyright 2011 The Associated Press.

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