EU leaders are gathering for 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.Urging legislators to support measures to boost the fund, German Chancellor Angela Merkel said Germany's prosperity depended on a solution to the crisis.
There are fears that the Greek debt crisis could spread to Italy and Spain.
Ahead of the summit in Brussels, German parliament voted to give Chancellor Merkel a mandate to strengthen the bailout fund.
Mrs Merkel said it was worth taking the risk to maximise the fund's spending power in order to safeguard Germany's future prosperity.
She also said she would work towards reaching sustainable decisions at the EU summit in Brussels later on Wednesday, but nobody should expect quick solutions.
Mrs Merkel said it would be necessary to stand by Greece for "quite some time to come".
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“Start Quote
End QuoteThere will be no stability for the eurozone without the bailout fund having the resources to do its vital job of demonstrating to the world that there's no possibility of Italy or Spain going bust ”
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 European Financial Stability Facility (EFSF) - the single currency's 440bn-euro bailout fund - 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.
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It's a self-appointed deadline the eurozone can't afford to miss.
By the early hours of Thursday, we may finally discover how much firepower has been amassed to try to blast away the debt turmoil steadily spreading from Europe's financially wayward periphery to its core.
Few expect the final package reached at Brussels will quite be the "big bazooka" demanded by UK Prime Minister David Cameron.
Yet the nature of the deal that's finally agreed will show whether the partners - and Germany in particular - have the will and capability to hold the currency zone together.
We are about to witness what may go down in history as one of the most significant meetings in EU history.
Of all the myriad issues that need fixing. the financial world expects clear responses on the three crucial issues of beefing up the rescue fund to protect Italy and Spain, reducing Greece's debt mountain and shoring up vulnerable banks that have lent to highly-indebted countries.
Analysis
By the early hours of Thursday, we may finally discover how much firepower has been amassed to try to blast away the debt turmoil steadily spreading from Europe's financially wayward periphery to its core.
Few expect the final package reached at Brussels will quite be the "big bazooka" demanded by UK Prime Minister David Cameron.
Yet the nature of the deal that's finally agreed will show whether the partners - and Germany in particular - have the will and capability to hold the currency zone together.
We are about to witness what may go down in history as one of the most significant meetings in EU history.
Of all the myriad issues that need fixing. the financial world expects clear responses on the three crucial issues of beefing up the rescue fund to protect Italy and Spain, reducing Greece's debt mountain and shoring up vulnerable banks that have lent to highly-indebted countries.
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.
Angela Merkel says ''we have to fight'' to resolve Europe's issues
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.
taken from http://www.bbc.co.uk/news/world-europe-15449149
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