Top EU Official Calls for Bigger Bailout Fund

BRUSSELS (AP) — The European Union's top monetary official says the euro440 billion ($570 billion) bailout fund for debt-ridden countries should be increased and given more powers.

Monetary Affairs Commissioner Olli Rehn said Wednesday that discussions with the 17 eurozone governments on boosting the size of the fund were currently going on "and progress is being made."

Rehn says "we need to review all options of the size and scope of our financial backstops."

Analysts fear that the existing backstop might be too small if a big economy like Spain runs into financial trouble. Portugal is holding a bond auction Wednesday that investors are scrutinizing to gauge the extent of its debt market problems.

The bond auction is seen as a key test of whether Portugal will end up requiring a bailout like Greece and Ireland.

The Portuguese government insists it doesn't need help and can restore trust in its fiscal policies with an austerity program of tax hikes and pay cuts.

But most analysts predict Portugal, a small country with a frail economy, will be engulfed by Europe's financial crisis as its borrowing costs rise to unsustainable levels.

Poor demand or punishingly high interest rates at Wednesday's auction of 3-year and 9-year bonds would deepen tension over the continent's financial woes.

Portugal needs to raise up to euro20 billion on financial markets this year.