Italian Premier, Mr Mario Monti, has said that he is confident the EU’s permanent bailout fund would grow in size with fresh funds, seeing a softening in German opposition.

“We are getting the feeling that there is a shift in Germany’s position and I am optimistic,” he told reporters after an EU summit here yesterday.

“It is important that the capacity of this fund is changed,” he said, although he added that “Italy would not need these funds.”

The bailout fund or European Stability Mechanism (ESM) agreed by EU leaders on Monday is set to have a maximum lending capacity of $657 billion when it comes into force in July.

Nevertheless, leaders have agreed to reconsider the overall amount of the fund in March — largely over fears that rose last year of a requirement for Italy or Spain to need financial aid.

German Chancellor, Ms Angela Merkel, has been staunch in her opposition to raising the upper limit, amid public opposition to throwing more taxpayers’ money into what is seen in Germany as a bottomless pit for Greece.

But Ms Merkel has found herself increasingly isolated on the issue, with the International Monetary Fund and the European Central Bank also piling on pressure to raise the ESM limit to €750 billion.

The ESM was set up to replace the European Financial Stability Fund (EFSF) which bailed out Portugal and Ireland and aims to guard against the debt problems of the likes of Greece seeping into bigger countries.

Unlike the EFSF, the ESM will have €80 billion in real cash, as well as guarantees. It will also be allowed to buy sovereign bonds in secondary markets as well as finance aid programmes for countries before they run into serious problems.

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