BRUSSELS (Reuters) – European Union leaders are unlikely to take a decision on how to strengthen the euro zone’s bailout fund until June, undermining market confidence and possibly prolonging the region’s debt crisis.

For months, EU leaders have talked about using a summit in Brussels this Thursday and Friday to reach a final agreement on a “comprehensive package” of measures that they hope will prevent the debt crisis from spreading further.

Although the leaders have decided to raise the effective lending capacity of the European Financial Stability Facility from 250 billion euros to its full size of 440 billion euros, they have not yet been able to agree on how to do that.

Draft conclusions prepared for this week’s summit, seen by Reuters on Wednesday, make clear that a definitive decision on how to bolster the fund will only be taken when leaders also formalize the structure of the European Stability Mechanism, a permanent fund that will replace the EFSF in 2013.

“The preparation of the ESM treaty and the amendments of the EFSF agreement, to ensure its 440 billion euro effective lending capacity, will be finalized so as to allow national procedures to be completed in good time for signature of both agreements at the same time before the end of June 2011,” the documents say.

News of the delay, coupled with concern that Portugal may soon follow Greece and Ireland in requiring emergency aid from the EU, drove down the euro and pushed up government bond yields for weaker euro zone states on Wednesday.

On Wednesday night, Portuguese Prime Minister Jose Socrates submitted his resignation to the president after parliament rejected new austerity steps that he had hoped would convince markets Lisbon was getting to grips with its budget deficit.

Socrates had said previously that a rejection of the steps would probably force Portugal to seek foreign aid. His government will for now keep power in a caretaker capacity.

“If these measures are not agreed, it seems more and more likely that Portugal will need some kind of support,” said Charles Diebel, head of market strategy at Lloyds Bank.

“Is this already reflected in the price? To a large degree yes it is, but there are also good causes for concern that this is not going to stop here.”

A euro zone source estimated in January that were Portugal to ask for aid, it might need between 60 and 80 billion euros. Those amounts would be comfortably within the scope of the EFSF even before its planned expansion, but it might be difficult for a caretaker government in Lisbon to negotiate bailout terms.

INCONCLUSIVE SUMMIT

The EU’s delay in reaching a deal to bolster the EFSF is partly due to politics and partly the result of a need to coordinate the legal and structural changes that being introduced and avoid national parliaments rejecting them.

Finland has dissolved its parliament ahead of an election on April 17 and cannot take any formal decisions until it has a new government in place, something that is only likely by May at the earliest.

There are also doubts in Germany about what capital commitments it needs to make to finance the ESM, which will have an effective capacity of 500 billion euros.