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By Robert Winnett, Political Editor in Los Cabos, Mexico | 9:27PM BST 19 Jun 2012 | The Telegraph

Two rescue funds are to be used to buy the debts of the troubled economies, the cost of which
have reached record highs in recent weeks.

It is hoped that the move, which represents a substantial shift in policy for Germany’s chancellor,
Angela Merkel, will send a strong signal to financial markets that Europe’s biggest economy is
finally prepared to back its weaker neighbours.



Under the proposed deal, two European rescue funds – the £400 billion (€500  billion) European
Stability Mechanism (ESM) and the £200 billion (€250  billion) European Financial Stability Facility
(EFSF) – will buy bonds issued by European countries.

Experts said it was a step towards establishing shared Eurobonds, where debt from across the
single currency area is shared and effectively underwritten by Germany.

The emergence of an outline rescue deal for Spain and Italy comes after Spanish bond yields
increased sharply to more than seven per cent after the re-run of the Greek election last weekend.

Alongside discussions of the eurozone deal at the G20 summit, world leaders agreed to increase
resources to the International Monetary Fund (IMF). China offered another £27 billion, and countries
including Brazil, Russia and India each pledged £6.3 billion, under a scheme to double the IMF’s
fighting fund. The US refused to contribute further funds.