Euro zone finance ministers discussed on Monday having more money in their rescue fund and cheaper emergency loans as part of a package of measures to end the sovereign debt crisis, but they made no firm decisions.

The chairman of euro zone finance ministers, Jean-Claude Juncker, said the ministers discussed many possible options under the package, but favored none at this stage.

We started discussions on a comprehensive package of measures to stabilize the euro zone. These talks have to continue, Juncker said after a monthly meeting of the finance ministers.

He vowed to accelerate work on the package, but was careful not to commit to being ready in time for the February 4 or March 24-25 European Union leaders' summits.

I wouldn't give a date for conclusion of our work, but the work will be done at the highest speed possible, Juncker said.

He said the ministers discussed a European Commission proposal to increase the effective lending capacity of the euro zone rescue fund, the European Financial Stability Facility (EFSF) to 440 billion euros, from about 250 billion now.

The 440 billion euros was the initial sum agreed to by euro zone countries when the EFSF was set up in May 2010, but it later turned out that because of the need to secure a triple-A credit rating, its effective lending capacity was much smaller.

The decision taken in May said that the facility will make 440 billion euros available. We are looking at the different ways we can actually do that, Juncker said.

Markets want to see more money available in the EFSF because they estimate the current amount would not be sufficient if both Portugal and Spain applied for euro zone emergency financing -- which some see as a possibility.

EFFECTIVE LENDING CAPACITY INCREASE

Juncker praised budget consolidation and reform efforts of both Lisbon and Madrid and said markets had noted them too.

Markets remain volatile, but related developments were encouraging. The spreads on sovereigns have moved in ways that illustrate this. The measures taken so far seem to be working, particularly those measures taken in Portugal and Spain, because those measures seem to have borne fruit, he said.

The rescue fund is already financing Ireland and the euro zone also has bilateral loan commitments to bankroll Greece for three years. EU Economic and Monetary Affairs Commissioner Olli Rehn was optimistic on boosting the EFSF's firepower.

I am confident that the effective lending capacity of the EFSF will be expanded, he told reporters.

Juncker also said that there was a general discussion about cheaper loans from the EFSF to countries cut off from market financing. The EFSF now adds a punitive 300 basis point margin for its loans on top of the average market rate.

We were discussing in general terms the question of lowering the interest rate for countries concerned, but we did not discuss this point in sufficient detail that I would be able to give you the outcome of that debate, Juncker said.

Many economists and policymakers believe a lower rate on emergency loans would help the struggling countries return to more sustainable debt levels.

A change decided now for EFSF loans would most likely mean lower borrowing costs also for Greece and Ireland under programs agreed last year, a euro zone source said.

GERMANY SEES NO RUSH

Growing realization that a deal to widen the bailout fund was not imminent caused the euro to retreat on Monday from a one-month high reached after successful debt auctions by Portugal and Spain last week.

A Reuters poll of bank analysts across Europe found most expect euro zone policymakers eventually to increase the firepower of the EFSF by 260 billion euros to 700 billion.

But German Finance Minister Wolfgang Schaeuble said that with bond markets calmer, there was no rush to take action now and work was being prepared for a late March EU summit.

The European Commission and the European Central Bank called last week not only for the EFSF to have more money but also to use it in a different way -- for example to buy government bonds on the secondary market, like the ECB does now.

Germany has so far opposed the idea and Juncker would not give any details on what support that idea had among euro zone finance ministers on Monday.

The ECB said it bought 2.3 billion euros in euro zone government bonds last week, its biggest weekly purchase for more than a month. The buying helped calm markets, enabling Spain and Portugal to stage successful auctions.

Madrid canceled another planned bond auction on Monday and decided instead on a 10-year bond sale through a syndicate of banks, to raise 6 billion euros.

The decision would help it to sell more debt while the going was relatively good, an analyst said, though the increased amount meant investors pushed up Spanish risk premiums slightly.

Belgium is also seeking an opportunity to place debt with a syndicate of banks and Portugal plans one for the first quarter, as fiscally stretched sovereign issuers elsewhere in Europe seek to cut spiraling financing costs.

(Reporting by euro zone bureaux, writing by Paul Taylor, Jan Strupczewski and Rex Merrifield, editing by Ron Askew)

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