Bloomberg News

Euro Chiefs Put Back Crisis Summit Amid Greek Writedown Tension

October 10, 2011

(See EXT4 for more on the euro-area financial crisis.)

Oct. 10 (Bloomberg) -- European leaders pushed back a debt- crisis summit amid tensions between Germany, France and the European Central Bank over possible deeper-than-planned writedowns of Greek bonds.

The planned Oct. 18 meeting was postponed to Oct. 23 as Europe gropes toward dealing with Greece’s oversized debt, insulating the Spanish and Italian markets, and shielding banks from the fallout.

“Further elements are needed to address the situation in Greece, the bank recapitalization and the enhanced efficiency of stabilization tools,” European Union President Herman Van Rompuy said in an e-mailed statement in Brussels today. “This timing will allow to finalize our comprehensive strategy.”

Germany and France yesterday set an end-of-month deadline for a breakthrough in handling the crisis, which has pushed Greece to the brink of default, roiled global markets and spurred speculation that the 17-nation euro region might not survive in its current form.

German Chancellor Angela Merkel and French President Nicolas Sarkozy put recapitalization of Europe’s banks at the top of the priority list in a joint declaration in Berlin yesterday. Sarkozy said they would deliver a plan by the Nov. 3 Group of 20 meeting.

Crisis Management

Finance ministers will hold an unscheduled meeting in the run-up to the euro summit, slated for a Sunday when the U.S. and European markets are closed. Europe has traditionally chosen weekends for market-sensitive crisis management, as when the euro area created the 440 billion-euro ($600 billion) rescue fund in May 2010.

Merkel and Sarkozy each called for a “lasting” solution to the 19-month crisis, echoing language the EU used in March when it unwrapped what it called a “comprehensive” package to restore economic order.

The new approach may scuttle a July 21 deal -- termed the “final package” by Luxembourg Prime Minister Jean-Claude Juncker at the time -- that foresees a 21 percent “voluntary” write-off of Greek bond values.

“It is looking as if the July 21 agreement just isn’t sufficient and that’s been increasingly recognized in Greece and the rest of Europe,” Julian Callow, chief European economist at Barclays Capital in London, said today on Bloomberg Television’s On the Move with Francine Lacqua.

--With assistance from Francine Lacqua in London. Editors: Andrew Atkinson, Simone Meier

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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