The absence of the continent's key economic ministers from the summit, where they were due to meet in advance of the formal EU leaders' meeting, raised doubts about the level of crucial detail that will be unveiled in plans that are supposed to safeguard the future of the single currency.
The absence of the continent's key economic ministers from the summit, where they were due to meet in advance of the formal EU leaders' meeting, raised doubts about the level of crucial detail that will be unveiled in plans that are supposed to safeguard the future of the single currency. Kaiser Nelson

European summit descends into chaos

THE emergency summit in Brussels was thrown into confusion as it was revealed that a meeting of European finance ministers has been cancelled.

The absence of the continent's key economic ministers from the summit, where they were due to meet in advance of the formal EU leaders' meeting, raised doubts about the level of crucial detail that will be unveiled in plans that are supposed to safeguard the future of the single currency.

In Britain, officials were privately downbeat about the prospect of any final deal being reached at the meeting, although Mr Cameron still intends to travel to Brussels for the meeting.

"Our sense at the moment is that these issues may not be resolved in time to announce any sort of comprehensive plan tomorrow night," a Government source said. "It's quite likely that we will be back again in a few days' time."

The German Chancellor, Angela Merkel, also indicated that she is fiercely opposed to the inclusion of any form of words in the plan that would enable the European Central Bank (ECB) to buy sovereign bonds to stabilise European debt markets. Referring to a draft of the summit statement mentioning the ECB's bond purchase scheme, Mrs Merkel told reporters in Berlin: "this sentence was not agreed by us". But many analysts argue that without some involvement from the central bank, it will prove impossible for European leaders to resolve the eurozone debt crisis.

There were signs, however, of progress on the question of what size of writedown should be imposed on the private banks that hold Greek sovereign debt. Jean-Claude Junker, who leads the group of eurozone finance ministers, said: "The private creditor participation will have to be more substantial, about 50 per cent."

Details of a complex plan to inflate the firepower of the European bailout fund, the European Financial Stability Facility, were also leaked. This is expected to involve a scheme to insure portions of newly issued sovereign bonds and also to establish a new fund designed to attract money from global investors.

The build-up to the crucial summit was further coloured by anxiety over Italian Prime Minister Silvio Berlusconi's ability to guarantee debt-slashing measures to satisfy the demands of other eurozone governments without causing the collapse of his fractious coalition.

That was a prospect that only receded, when Mr Berlusoni's king-making coalition partner, the Northern League, finally agreed to his planned reforms. While Northern League leader Umberto Bossi said he had reached agreement with Silvio Berlusconi about a key pension reform, he was still pessimistic about the survival of the coalition government.

"In the end we have found a way. Now we will see what the EU says," Mr Bossi told reporters. "I remain pessimistic."

But with just hours to go before the summit, Italy's contribution to rescuing the euro by shoring up its finances with pension cuts appeared to have hit the rocks, with the Northern League saying it would block a rise in pension age, from 60 in some cases, to 67 in line with other EU countries.

Infrastructure Minister Altero Matteoli admitted the political crisis might sink the government. "We are in the process of negotiating. There is this hypothesis [that the government could fall], but there is a margin for manoeuvre," he said.

Professor Francesco Giavazzi, of Milan's Bocconi University, said: "At this moment a government crisis would be a disaster, because in the next months we have a huge quantity of debt that needs to be refinanced."

Lamberto Dini, a former Italian prime minister, said on Sky Italia there was "no alternative to raising the pension age", and without it, Italy would "head down the same road as Greece".

Italy was effectively given 48 hours on Monday by the EU to introduce measures that would protect it from debt contagion.



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