Arab Today, arab today euro crisis eu leaders to finalise debttackling plan
Last Updated : GMT 14:41:18
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Euro crisis: EU leaders to finalise debt-tackling plan

Arab Today, arab today

Arab Today, arab today Euro crisis: EU leaders to finalise debt-tackling plan

Rome - Arabstoday

European Union leaders are gathering for an emergency summit in Brussels designed to finalise details of a plan to tackle the eurozone debt crisis. Inconclusive weekend talks focused on a deal to force banks to secure capital to offset future losses, as well as increasing the firepower of the bailout fund for troubled eurozone countries. There are fears that the Greek debt crisis could spread to Italy and Spain. Italy has been asked to provide details of its plans before the summit begins. The ruling coalition led by Prime Minister Silvio Berlusconi is reported to have reached a last-minute limited deal on economic reforms - including the contentious issue of increasing the pension age. His coalition partner, Northern League leader Umberto Bossi, said late on Tuesday: \"In the end we have found a way. Now we will see what the EU says.\" Rome\'s EU partners had demanded action to tackle Italy\'s huge public debt prior to the meeting in Brussels. 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 as yet 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. According to the plan, the 100bn-euro bank recapitalisation 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 German Chancellor Angela 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. 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. There are fears that a unilateral default by Greece - such as a debt write-off without lenders\' consent - could have unforeseen consequences. The BBC\'s business editor, Robert Peston, says the future of the eurozone hinges on what level of financial risk the German government is prepared to take in providing emergency credit. French Prime Minister Francois Fillon said that if Wednesday\'s summit ended in failure, \"this could tip the European continent into unknown territory\". Bailout packages for Greece (twice), Portugal and the Republic of Ireland have already been agreed, but stock markets remain in turmoil. Chancellor Merkel has told Prime Minister Silvio Berlusconi that Italy\'s high level of debt \"has to be reduced in a credible way in the years ahead\". Raising the retirement age is one of the key economic reforms demanded by the country\'s EU partners as a condition for supporting Italy\'s bonds. But Mr Berlusconi\'s main coalition partner, Northern League leader Umberto Bossi, warned that he may withdraw his support and topple the government. \"I\'m not touching our pensions, which are fine, to bring up the age to 67 just to please the Germans,\" Mr Bossi said on Tuesday. And despite the reported deal - the so-called \"letter of intent\" - reached after marathon talks later on Tuesday, Mr Bossi said he remained pessimistic about the survival of the government. 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 of international financial markets about the country\'s ability to repay its long-term debts. Italy, the third largest economy in the eurozone, needs to issue some 600bn euros (in bonds over the next three years to refinance maturing debt.

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