The continent’s biggest financial institutions were at the center of talks as leaders entered marathon negotiations in Brussels, at the end of which they have promised to present a comprehensive plan to take Europe out of its crippling debt crisis.
“Between now and Wednesday we have to find a solution, a structural solution, an ambitious solution and a definitive solution,” French President Nicolas Sarkozy said as he arrived in Brussels. “There’s no other choice.”
German Chancellor Angela Merkel said she believed the leaders will devise a plan by Wednesday to protect the euro.
Before the morning meeting, Greek Prime Minister George Papandreou urged Europe to “act decisively and effectively” to contain the troubles.
“It’s been proven now that the crisis is not a Greek crisis,” he told reporters. “The crisis is a European crisis. So now is the time that we as Europeans need to act decisively and effectively.”
On Friday, the first day of the marathon talks, the finance ministers of the 17 countries that use the euro – and which have found themselves at the center of the crisis because of the currency they share – agreed to demand Greece’s private creditors take big losses on their bondholdings.
In addition to new financing for Greece, leaders want to make the banking sector fit to sustain worsening market turmoil and turn their bailout fund into a strong safety net that will stop big economies like Italy and Spain from falling into the same debt trap that has already snapped Greece, Ireland and Portugal.
The provisional deal agreed by finance ministers will see banks raise more than 100bn euros (£87bn) in new capital to shield them against possible losses to indebted countries.
It is conditional on a wider accord, including a write-down of Greek debt.
The single Treasury plan emerged in Brussels yesterday as Europe’s finance ministers tried to find a way out of the crisis engulfing the eurozone. A full-scale rescue plan could cost about £1.75 trillion.
The plan comes as European governments desperately trying to save the euro from collapse last night faced a new bombshell, with sources at the International Monetary Fund saying it would not pay for a second Greek bail-out.
They were overshadowed last night as senior sources at the International Monetary Fund indicated privately that it is not willing to further bail out Greece, whose economy has an outstanding debt of about £232 billion.
The IMF, with the EU and the European Central Bank, is assessing Greece’s debt crisis, and a joint report yesterday suggested lenders might have to agree losses of up to 60 per cent in a Greek default.
Any suggestion that the IMF would not be part of a new bail-out of Greece could spark panic in the markets and worsen the eurozone crisis.
Shortly before the summit began, Italy’s Prime Minister Silvio Berlusconi held private talks with EU President Herman Van Rompuy, Mrs Merkel, and French President Nicolas Sarkozy. [via Huff Post, BBC and The Telegraph]