Sunday, October 23, 2011

Euro crisis rescue deal takes shape

EU leaders closed in on a broad agreement on Sunday to resolve the euro crisis and pressed Italy to slash its debt mountain to reassure jittery world markets.

A summit of EU leaders came together on plans to boost the firepower of the eurozone rescue fund -- the European Financial Stability Facility -- and backed plans to recapitalize banks who would be hit by a massive write-down of Greek debt.

They also agreed to explore a re-opening of the core European Union treaty to cover closer eurozone integration although non-euro states remain wary about moves that might leave them out.

For that reason, the bloc was forced to bring all 27 member states back for a second meeting on Wednesday to finalize a response to the debt crisis.

The second summit in four days was originally meant only to involve the 17 nations that share the euro single currency.

Speaking alongside German Chancellor Angela Merkel at a joint press conference, French President Nicolas Sarkozy said "a quite broad agreement is taking shape on the reinforcement of the EFSF."

Merkel said a French idea for the fund to acquire a banking license was dead and buried, leaving a mix of plans to use the EFSF to offer insurance to eurozone bond holders, and moves to create a 'fund within the fund' that would be topped up by some of the main emerging nations.

The "leveraging" of the EFSF comes alongside a deal being negotiated with banks for them to accept a 50 percent write-off on Greek debt, in exchange for a new bailout by the EU and the International Monetary Fund.