Debt dilemma deepens as euro summit stalls

From The Sydney Morning Herald:

LONDON: Hopes for a grand plan to solve the European debt crisis at the emergency summit of political leaders in Brussels have faded, with France and Germany continuing to be at odds over the rescue package.

Fears of a double-dip global recession rose as hopes for the rescue deal fell, with shares plunging in Europe and New York as negotiations continued late into Tuesday night.

The deadlock forced the cancellation of a meeting of the European Union's 27 finance ministers that had been planned for the start of the summit yesterday morning. But two other meetings were set to go ahead. The 27 EU countries were to discuss rescue proposals - non-euro countries such as Britain are keen to ensure they are not disadvantaged by any deal - and then the 17 members of the single-currency euro zone were to vote on final measures.

The prolonged hand-wringing over the 18-month crisis produced near-despair among some EU diplomats, with one telling The Guardian: ''Everybody realises we are on the brink of such a total catastrophe that anything that prevents it and a huge recession must be grasped.

''The markets will kill us if they haven't laughed themselves to death.'' The rescue proposals have three pillars: persuading creditors to give up hope of being repaid a large proportion of Greek debt (known as a write-down or a ''haircut''); injecting more money into Europe's banks so they can withstand the shock waves of a Greek default; and increasing the euro zone's bailout fund, the European Financial Stability Facility, so it can cope if larger debt-ridden economies such as Spain or Italy need to call upon it.

Read more: http://www.smh.com.au/world/debt-dilemma-deepens-as-euro-summit-stalls-20111026-1mk46.html#ixzz1bvn3eKoD