* Germany open to EFSF continuing to lend through mid-2013
* Compromise comes amid international pressure on Berlin
* Merkel faces domestic opposition to firewall boost
BERLIN, March 26 German Chancellor Angela Merkel
signalled for the first time on Monday that she was prepared to
compromise on boosting the resources available for bailing out
struggling euro zone states, paving the way for an increase in
the bloc's firewall to contain the debt crisis.
Speaking at a meeting of her conservative Christian
Democrats (CDU), Merkel said she could imagine that the bloc's
two rescue funds could run in parallel so that a total of 500
billion euros in new funds were available for problem countries.
The only way to accomplish this, without accelerating
payments into the bloc's new fund, the European Stability
Mechanism (ESM), would be to allow the existing fund, the
European Financial Stability Facility (EFSF), to continue to be
an active lender between mid-2012 and mid-2013.
"We say the ESM should remain permanently at the 500 billion
euro level, but in order for us to have 500 billion euros in
available money, then we can imagine ... allowing the programmes
... to run in parallel," Merkel said.
Germany has been under pressure from its international
partners to agree to an increase in the euro zone's firewall,
with some countries like Britain making clear that without it,
they will refuse to make additional funds available to the
International Monetary Fund.
European leaders agreed last year to take another look at
their firewall by the end of March and finance ministers are
expected to discuss bolstering it at a meeting in Copenhagen
later this week.
The EFSF still has approximately 240 billion euros in unused
funds and government sources told Reuters that Berlin was
prepared to accept that these be made available after the ESM
was up and running in mid-2012.
Any unused funds remaining in the EFSF midway through 2013
would be cancelled, with the ESM remaining the sole fund capable
of doling out new loans, the sources said.
Getting all the parties in Merkel's centre-right coalition
on board for this solution could prove difficult however as it
would likely lead to an increase in Berlin's guarantees to some
290 billion euros from 211 billion previously.
The head of the Bavarian Christian Social Union (CSU) Horst
Seehofer said on Monday after Merkel had spoken that any
increase above 211 billion euros remained a "red line" for him.