European finance officials are contemplating whether to expand the continent’s bailout fund, already heavily tapped to save Greece and Ireland from financial disaster.

Fears are growing that the existing rescue fund wouldn’t provide sufficient support if Europe’s fiscal woes spread to larger economies such as Spain. The European Union’s executive arm is pushing for Germany to backstop a doubling of the €750-billion ($1-trillion) fund – which was established in May by the EU and International Monetary Fund to bolster confidence in the euro zone’s government finances at the height of the Greek crisis – according to reports.

Discussions around boosting the size of Europe’s bailout fund reflect growing anxiety in Europe, following the €85-billion rescue package put in place this week for Ireland. Bond markets remain unsteady as investors fear some other countries won’t able to reduce budget deficits and debt burdens fast enough as they finance spending amid sluggish economic growth. For that reason, European officials are eager to instill confidence that the bailout fund is large enough to assist other nations if needed.

Any move to boost Europe’s bailout fund would also take German voters down a road they were once assured would never be travelled, as the continent increasingly looks to that country’s economic and fiscal health for support.

European and German officials denied reports in The Wall Street Journal and German newspaper Die Welt that any plan to double the bailout fund is in the works. And late Thursday, German Chancellor Angela Merkel, after a phone conversation with French President Nicolas Sarkozy, said the size of the fund would not be changed until at least 2013, the deadline by which a more permanent mechanism for dealing with crises like these is supposed to be set up.

European Central Bank council member Axel Weber, however, said governments could increase the size of the fund if necessary, but the fund would need only an extra €140-billion in the worst-case scenario.

Mr. Weber’s comments came as Irish Prime Minister Brian Cowen was in the first stages of a furious push to sell voters and lawmakers on a four-year austerity plan that was required to secure support from the EU and IMF to keep the erstwhile Celtic Tiger’s banking sector from imploding, and as observers brace for a possible Portuguese rescue.

The mixed messaging underscores the conundrum in which Germany’s leaders find themselves, as voters in Europe’s economic engine become angrier and more resentful by the day about having to underwrite weaker EU cousins whose fiscal habits might as well put them in another solar system. German voters were assured more than a decade ago when they adopted the euro that those who didn’t quickly find fiscal religion would be left to suffer the consequences.

Mindful of the political dynamic, Ms. Merkel inadvertently fanned the flames of the Irish debt crisis recently by re-emphasizing that bondholders should be prepared to take losses when investments go sour. The comment made investors dump government securities not only from Ireland but also from Greece, Portugal and Spain, which sent yields soaring and turned a simmering problem into a virtual replay of the Greek drama that played out earlier this year.

“If she says, ‘Look, everybody, we’re going to make sure that people share in the burden and other people including the investors will be paying the tab for these bailouts,’ that in and of itself makes the crisis worse and spreads the contagion,” said Ian Lee, MBA director at Carleton University's Sprott School of Business, who has focused much of his research in the past year on the sovereign and bank debt problems in Europe. “But she can’t say the opposite, because German public opinion is more and more strongly opposed to these bailouts.”

To be sure, Ms. Merkel has clearly realized that some of her earlier comments weren’t helping the wider situation. Earlier this week she declared that questions swirling around the euro were “exceptionally serious.” On Thursday she said Germany is ready to “act in solidarity” to help preserve the continent’s single currency.

Also, she clarified Thursday that she envisioned private investors sharing the burden of future debt crises from 2013 onward, and no sooner.

“It does appear there’s an attempt by Germany to really try to soothe markets, which is good because it implies there’s an understanding of just how powerful the confidence of markets can be in this type of situation,” said Camilla Sutton, a currency strategist with Scotia Capital.

Market confidence, however, seems to be the farthest thing from the minds of German taxpayers these days.