* 21 of 28 analysts see increase in euro zone rescue fund
* Fund seen boosted to 700 billion euros
* Only 10 of 29 analysts see common euro zone bond
By Jonathan Cable
LONDON, Dec 15 (Reuters) - The European Union will need to increase the size of its rescue fund in 2011 amid fears it will be called on again but is unlikely to issue an all-member backed bond, a Reuters poll of economists showed on Wednesday.
The European Financial Stability Facility (EFSF), which has 440 billion euros of EU funds, will likely have to be increased next year, according to three-quarters of analysts polled over the past week in the run-up to the last EU summit of 2010.
EU leaders meet on Dec. 16-17 to approve a change in the union's treaty that should lead to the creation of a permanent mechanism for handling euro zone financial and debt crises from mid-2013, replacing the EFSF.
ECB President Jean-Claude Trichet called on Tuesday for the 16-member bloc to give the rescue fund maximum flexibility in both size and scope. The Reuters poll predicted the fund would be increased to 700 billion euros of EU funds.
"A near-term solution remains to increase the size of the EFSF. Allowing the EFSF to purchase government bonds in the secondary market would also be a powerful tool to fight contagion," said Elwin de Groot at Rabobank.
Ireland agreed an 85 billion euro bailout deal from the EU and International Monetary Fund in November to prop up its battered economy, months after Greece obtained a similar rescue package.
Since the Ireland bailout was announced, the European Central Bank has stepped up its modest government bond purchase programme, focusing on Ireland and Portugal, to force down rising yields.
Portugal will probably need to seek bailout funds from the European Union, according to a majority of economists in a Reuters poll taken late last month.
Like Ireland and Greece, Portugal this year announced vast budget austerity measures aimed at convincing financial markets it can deal with its debt burden itself while issuing bonds at affordable rates.
E-BONDS BLOCKED
Luxembourg's Prime Minister Jean-Claude Juncker and Italian Finance Minister Giulio Tremonti called earlier this month for a bond to be jointly issued by euro zone countries but only 10 of 29 analysts in the poll expected to eventually see common bonds.
Juncker and Tremonti said the joint European sovereign bonds -- "E-bonds" -- would assert the "irreversibility of the euro".
But the plan quickly ran into opposition from Germany, Europe's biggest economy, which said there were legal and economic hindrances to the bonds that would require fundamental changes to the European Union's underlying treaty.
Germany is also keen to ensure governments are kept under pressure from bond markets, to avoid a repeat of the years of easy borrowing that led to Europe's debt crisis.
"I do not think we will see common euro zone bonds in the foreseeable future. Such financial instruments can come to birth in the future, but after further evolution in the way the European Union is functioning," said Jean-Louis Mourier at Aurel-BGC.
Luxembourg's Foreign Minister, Jean Asselborn, said on Monday the topic of joint euro zone bonds would not be on the agenda at this week's EU summit and could be dropped altogether if leaders move more decisively to defend the euro. (Editing by Stephen Nisbet)