Euro summit faces splits on rescue fund, Greek haircut

From: EUXTV  | Oct 26, 2011 

 

With only hours to go before one of the most important summits in European history, observers in Brussels believe that the talks will not provide the "comprehensive agreement" initially promised by German Chancellor Angela Merkel and French President Nicolas Sarkozy.
A definitive agreement to rescue the euro may still take days to finalise.

According to Euractiv, diplomats report a lack of progress on the expansion of the EU rescue fund. That slowdown has already caused a last-minute cancellation of a meeting of euro zone finance ministers.

Banking recapitalization also remainsi a troubling issue. EU leaders have agreed that banks need more capital but they still have to say how much and how the banks will get this.
Banks say they could live with a 40% haircut on Greek debt but some EU leaders, including Merkel are pushing for 60 percent.

The same muddle goes for the EFSF. There is still no exact figure for a bigger fund, with figures ranging between 1000 and 2000 billion euro. It remains unclear how that bigger firepower would be achieved.
To boost the fund, EU leaders have two options: an insurance option and an investment option. They can also consider sing a combination of these.

The investment option would raise money from governments and possibly tap investors on capital markets.
Diplomats, talking to EurActiv on condition of anonymity, said creating clarity on the role of this investment option in handling the growing debt problem is the most important part of the talks at the moment.
It's clear that a comprehensive deal is not in sight yet, but parts of the solution are likely to be made public in the next 24 hours. It remains to be seen if that will renew the confidence in the euro on the international financial markets. Ray Frenken. EUX.tv