Forget the federal Budget tomorrow and the bickering in London on a new government and worry instead about the sudden and enormous escalation of the stakes over sovereign debt in Europe.

Thanks to more confusion from the eurozone and its outriders in the European Union, financial markets in Asia spent hours waiting this morning for news of just how the Europeans plan to defend the eurozone and all 27 member countries of the EU. Nothing came at the suggested times, except a stream of leaks and updates to newsagencies and papers such as the Financial Times.

Agreement came nearly 12 hours later than expected, after midnight Sunday, European time (about 11am Sydney time). When it came, it was as leaks during the morning suggested: €500 billion of support, while Bloomberg said it could be as much as €720 billion, or more than $A1 trillion. That’s almost the entire annual GDP of the Australian economy. Reuters put the figure at €500 billion.

All reports said the European Central Bank will make an announcement soon on the level and type of support it will provide.

Early reaction to news of the package in Asia trading Monday morning was OK, with the euro gaining almost 2% on the US dollar and 3% on the yen.

The IMF will be asked to cough up €220 billion or so (hence the higher figure from Bloomberg). Even the UK will chip in about £13 billion at most, even though its not in the euro. That would have been one of the final decisions of the Brown Labour government, but would have needed the approval of the Conservatives and the Lib Democrats who look like reaching agreement on some sort of power sharing over the next 12 hours.

But it was a curious way to try and ensure the stability of the 16 countries in the eurozone, the future of the euro, the stability of all of Europe and the global economy: all now are at stake.

There is a driver to this wrangling: just as the inability of Greece to refinance €8.5 billion of debt by May 19 forced last week’s €110 billion support package, it was the realisation that other weak economies had more than €200 billion in debt falling due in the next three months that helped produced a huge one off package of support that had to convince the markets once and for all that Europe was serious.

About €216 billion of debt in Italy, Spain, Greece and Portugal fall due in the next three months. Italy dominates with €126 billion of debt in its own right. While the debt could have been financed, it would have been done so at rising cost with interest rates soaring as lenders demanded greater returns for the higher risks. It is very possible that not all this money could have been rolled over or repaid, which would have raised the prospect of default and a crash.

The IMF last night signed off on its funding for the Greek bailout and will push enough money into the country for it to roll over €8.5 billion by the May 19 deadline.

But that backstop for Greece wasn’t enough, so on Friday, after Germany voted to approve its contribution, and then the eurozone leaders held a summit Friday night, our time, it was decided to up the stakes by designing a package to large and so convincing that it would end speculation against the euro and the weak members such as Spain, Italy and Portugal, and stop it spreading to the UK and pulling the economies of all 27 members of the EU back into recession.

Over the weekend, Europe has been putting together the  €600 billion support package of measures to defend the weak: Ireland, Spain, Italy and Portugal, and to defend the strong in keeping the euro stable, and in fact keeping the currency viable. This is before any announcement from the European Central Bank, which last week tipped its hand by dropping the A rating requirement for buying securities from Greek banks. That could not be extended to other banks.

Complicating matters for Germany and Chancellor Angela Merkel was the election loss in the North Rhine Westphalia state poll overnight. The help for Greece was the main issue, this huge package of support could trigger further political and legal protests.

For this reason (and the fact the UK didn’t want to play and pay), the deadlines slipped: first the spin was that Europe had to get its huge financial support package in place and announced before Asian markets opened for trading today, or that was the implication in various reports on Sunday and earlier today.

But as the finance ministers from the Eurozone dithered (aka negotiated) about just what they would be doing, the timing slipped. There was to be a press conference in Europe at 6pm European time Sunday (2am Monday Sydney time). Then that drifted, and drifted until a statement was promised at 9pm GMT (5am Sydney time). Nothing happened.

Now its before “markets open for trading”, which is being taken to mean European markets. Seeing some trading rooms are already open and dealing with Asia (Japan, Singapore and Australia) and that full trading will start from 2-3 pm onwards today, the Europeans had better get their skates on.

In short this so-called “shock and awe” package, as some spinners in Europe have dubbed it, is struggling at its creation.

UK Chancellor Alistair  Darling and his Treasury department ruled out any help, but then ruled it in, so Britain is on the hook for at least £13 billion .

The shadow Chancellor in the Conservatives, George Osborne, and the Lib Democrats spokesman, Vince Cable, were kept up to speed on the whole issue and the negotiations, while their leaders David Cameron and Nick Clegg negotiate fruitlessly about a possible alliance. It now looks like the two parties could reveal an economic relationship in a few hours.

The outline of the package from Europe is (according to reports on Reuters, the FT and Bloomberg).
A €500 billion fund, made up of a €440 billion of government-backed loan guarantees for any eurozone country facing serious debt difficulties, and a €60 billion increase in a balance-of-payment facility that was used in 2008 by the EC to help Latvia and Hungary.

Only eurozone governments will contribute to the first element of the plan. All 27 European Union states will contribute to the balance-of-payments facility. It will underwrite loans taken out by vulnerable states (such as Spain, Italy, etc) second element. Some reports said the EC would mortgage its €141 billion a year budget to support that increase to about €110 billion.

The ECB said said it will intervene in government and private bond markets as part of the eurozone/EC support.

“The governing council decided to conduct interventions in the euro area public and private debt securities markets to ensure depth and liquidity in those market segments which are dysfunctional,” the Frankfurt-based central bank said in a statement today. “The scope of the interventions will be determined by the governing council.”

The ECB said it will sterilise the purchases and announced it will hold additional longer-term operations at three- and six-month maturities. The central bank also said that it will reactivate temporary liquidity swap lines with the Federal Reserve to resume US dollar tenders at terms of seven  and 84 days.