AP

LUXEMBOURG EUROZONE leaders will likely boost the firepower of their bailout fund at a summit later this month, Belgium’s finance minister said on Tuesday, as a push to impose larger losses on Greece’s private creditors appeared to be gaining more steam.

Both moves form part of a broader overhaul of the currency union’s crisis strategy as it becomes obvious that Greece will not be able to repay its massive debts – some 160 percent of economic output – in full, despite billions of euros on rescue loans.

But before the eurozone can take more stringent measures on Greece, they have to build up safety nets for weak banks and other struggling economies, such as Italy and Spain.

The slow progress on solving the crisis, which has dragged on for almost two years, is weighing on global markets and investors continued to sell off shares and the euro after ministers late Monday delayed a decision on paying out a crucial aid installment until the end of the month.

Greece has said that without the €8 billion slice of its first €110 billion bailout it would start running out of money by mid-October.

Eurogroup chairman Jean- Claude Juncker insisted that Athens could continue paying its bills as long as it gets the money in November.

Although the ministers, who were meeting in Luxembourg on Monday and Tuesday, want to keep pressure on Athens to speed up reforms and privatisations, there is little doubt that Greece will eventually receive the money - if only to buy time until a broader solution has been found.

A key part of that will be increasing the firepower of the eurozone’s bailout fund, the €440 billion ($586 billion) European Financial Stability Facility.

In the summer, leaders agreed to boost the powers of the bailout fund by allowing it to buy government bonds and recapitalize banks. One last eurozone state, Slovakia, has yet to approve that move, with a parliamentary vote due this month.

But to back up the new powers, most economists agree the fund needs to be larger. Because states are reluctant to increase their financial commitments, ministers are now looking at complicated technical schemes to leverage the fund, possiblly by allowing it to guarantee bond issues of struggling countries like Italy and Spain.

Didier Reynders, the finance minister for Belgium – which has traditionally opposed any losses on banks and other private investors in Greek bonds – also appeared to be scaling back his resistance.

Asked whether he believed writedowns on Greek bonds needed to go beyond the 21 percent tentatively agreed in July, the minister said “we’ll see,” adding that first all eurozone parliaments needed to sign off on changes to the bailout fund. Those changes will give the EFSF new tools to intervene preemptively if market pressures increase on a particular country and crucially provide loans to recapitalize banks.