Euro summit: EU leaders seek deal on debt crisis

EU leaders are holding an emergency summit in Brussels aimed at tackling the eurozone debt crisis.

But with disagreement on how to expand the EU's bailout fund for debt-ridden countries, there is growing doubt a comprehensive deal will be reached.
German Chancellor Angela Merkel, after winning support from her parliament for moves to boost the fund, said there remained "many problems to settle".
There are fears that the Greek debt crisis could spread to Italy and Spain.
As MPs prepared to vote in Berlin, Chancellor Merkel said it was worth taking the risk to maximise the bailout fund's spending power in order to safeguard Germany's future prosperity.
"The world is watching Germany and Europe," she said. "They are looking to see if we are ready and able to assume our responsibilities during Europe's worst crisis since the end of World War II."
Mrs Merkel won a comfortable majority for plans to strengthen the European Financial Stability Facility (EFSF) - the single currency's 440bn-euro bailout fund.
Later, as she arrived in Brussels, she told reporters: "There are still many problems to settle and negotiations to carry out."

Greek Prime Minister George Papandreou said: "Our challenge today is not simply to save the euro. It's to safeguard the ideals we cherish so much in Europe: peaceful co-operation amongst our nations, social cohesion and solidarity."

As attention shifts to Italy and its huge public debt, Prime Minister Silvio Berlusconi has been asked to provide his EU colleagues in Brussels with details of plans for economic reforms.
Sticking points Among the main points of agreement reportedly reached at the weekend by EU officials are:

• European banks must raise more than 100bn euros (£87bn) in new capital to shield them against possible losses to indebted countries
• The EFSF will be given more firepower, although it is not clear how this will be achieved
• Lenders to Greece will be asked to agree to much deeper losses than the 21% write-off currently on the table.
• After the talks began, British Prime Minister David Cameron told reporters that the deal on bank recapitalisation had been approved by the EU leaders, but that it would only go ahead once an overall agreement had been reached.
  According to the plan, the 100bn-euro in new capital would be provided to banks by commercial investors, national governments and the EFSF.
  Key points of disagreement remain between the main eurozone powers.
  France had hoped that the European Central Bank (ECB) would support the EFSF by providing it with loans that could increase the fund's total capacity to 2tn-3tn euros.
  But this idea was blocked by Chancellor Merkel.
  Instead, governments are expected to agree that the EFSF can help out troubled eurozone governments such as Italy and Spain by providing partial guarantees to investors and banks who lend them more money.
  Stopgap BBC business editor Robert Peston says the EU is left with using complicated financial engineering that may only boost the EFSF capacity to about 1tn euros.
  He says the markets may be disappointed in this move, which may only buy a year or so - not enough time for fundamental reform of Europe's debt-ridden economies.
  There was also disagreement over the extent of losses that should be imposed on Greece's lenders, with Germany seeking a 50%-60% haircut.
  The ECB is said to be against such an increase in potential losses.
  And difficulty about such details appear to have been behind a decision to cancel a meeting of EU finance ministers which was to have preceded the leaders' summit.
  French Prime Minister Francois Fillon said that if Wednesday's summit ended in failure, "this could tip the European continent into unknown territory".
  Mr Berlusconi is expected to provide only promises of economic reforms in Italy, even though other eurozone leaders have demanded he bring concrete plans to Brussels of how the government intends to reduce its debt.
  In a long day of talks with his Northern League coalition partner, an agreement was reached on the contentious issue of raising the retirement age to 67 by 2025.
  The BBC's David Willey in Rome says there is little ground for optimism that the deal is going to satisfy either Italy's EU partners or international financial markets about the country's ability to repay its long-term debts.
  
   

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