EUROPE TIGHTENS RANKS ON EURO RESCUE FUND

Brussels, January 18 (AFP)- Europe closed ranks around the euro as its richest nations strived to reach a deal Tuesday to boost the capacity of its bailout fund for fragile eurozone states.

As European Union finance ministers prepared for a second and final day of talks in Brussels, Luxembourg Prime Minister Jean-Claude Juncker, who chairs the 17-nation Eurogroup, said members were rallying to stave off market attacks on weaker members.

They achieved a "very high level of convergence" on how to shield debt-laden member states such as Portugal or Spain, with only "slight differences, nothing dramatic," Juncker said late Monday.

The EU remains under pressure to settle the size and scope of an overhaul of a 750-billion-euro (1.0-trillion-dollar) fund set up last year to protect the euro after Greece became the first eurozone country to be bailed out.

The eurozone is responsible for the lion's share -440 billion euros- backed by 250 billion from the International Monetary Fund and 60 billion from non-euro EU states.

"We'll speed up our work," Juncker said, with several ministers, led by Germany's Wolfgang Schaeuble, insisting successful Portuguese and Spanish bond issues last week had shown they were on the right track.

To maximise the effectiveness of the rescue fund, six eurozone "Triple-A" rated members -Germany, France, the Netherlands, Austria, Luxembourg and Finland- that together contribute over 60 percent met to come to a joint position.

Their willingness to put up more guarantees stemmed from a "determination" to improve the use of current resources rather than pump in more money and included policies for fiscal consolidation, growth and economic reform, sources said.

Juncker said there was a renewed willingness to "respect" the loan guarantees ceiling in exchange for "comprehensive" reforms.

"We made commitments in May, these commitments will be respected," Juncker said of the 440 billion, "making available the funds we promised”.

"We are looking into the different instruments we can press into service in order to do that”.

Experts are studying their options and the threats: until now, it was said that some 200 billion of these guarantees had to be kept in reserve as a buffer in order to borrow money at low rates for subsequent lending to countries in trouble.

That meant that the rescue fund in effect totalled 250 billion euros.

While European Commission chief Jose Manuel Barroso has called for a quick decision amid calls for the EU to double the size of its backstop resources, Juncker refused to be drawn on dates for conclusion of the work although he admitted there was "a certain urgency”.

A February 4 summit of EU leaders is likely to come too soon.

Finnish EU economic and financial affairs commissioner Olli Rehn said the broader goal was to ensure "that so-called market forces cannot have even the slightest doubt about our capacity to act”.

Lending capacity "should be reinforced" to "make 2011 the year when Europe overcame the financial crisis and lifted its growth potential," Rehn underlined.

Amid disquiet about diverging rates being paid on the rescue funding, ministers also compared the respective charges for EU bailouts of Greece and Ireland.

Irish Finance Minister Brian Lenihan said he was looking for "a better deal," but Juncker said it was only the beginning of a lengthy debate about ensuring long-lasting solidarity across the EU.

Dublin agreed to pay on average 5.8 percent for its 67.5-billion-euro international bailout in December, whereas Greece was closer to 5.2 percent - although that rate will rise with a longer repayment period than initially planned already agreed in principle.

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