IMF and EU set for talks

European Financial Stability fund may be quadrupled in order to rescue the eurozone.

The latest round of talks between the International Monetary Fund (IMF) and the European Union (EU) are expected to produce a new plan to secure the long-term stability of the eurozone.

Reports suggest that the European Financial Stability Facility - the fund used to bail-out heavily indebted eurozone economies - will be quadrupled to 2 trillion euros within the next five to six weeks. Further, it is thought that the capital base of the eurozone's largest banks will be strengthened to enable them to better absorb losses.

The plan will also make provisions for another Greek recovery package, including a possible 50 per cent write-down of the country's debt repayments. After a meeting with IMF chief Christine Lagarde in Washington, Greece's Finance Minister Evangelos Venizelos re-affirmed his government's commitment to reducing its massive structural deficit, which currently represents 160 per cent of Greece's total GDP.

EU and IMF officials are going to meet again this week to discuss the crisis engulfing the eurozone and examine Greece's progress toward fiscal consolidation. Greece could stand to lose the next tranche of rescue funds if it is judged that public expenditure is not being cut fast enough.