BRUSSELS — Struggling to assemble a credible backstop for their troubled single currency, European Union leaders on Sunday reached out for wider international support for their bailout fund by seeking investment from non-European countries or the International Monetary Fund.
Officials of the 27 nations in the European Union chalked up one victory from lengthy weekend meetings in Brussels, striking a deal to recapitalize the sickly European banking sector. Despite some resistance, agreement seemed close on a plan worth around 100 billion euros, or $138 billion, to recapitalize banks.
But as of Sunday night, officials still had no definitive answer on how they would expand the euro rescue fund, the European Financial Stability Facility — though one official said they were aiming for €750 billion to €1.25 trillion, or $1 trillion to $1.7 trillion. It is currently $600 billion or €440 billion.
The leaders were also struggling with the amount of the loss that holders of Greek bonds would be required to take in the rescue of that country — by some estimates as much as 60 percent — a crucial element that is essential to making the rest of the E.U package of measures add up.
Final decisions on the two issues will have to wait until a second summit meeting on Wednesday. And longer-term solutions to the problems revealed by the financial crisis are likely to lead to a change in the European Union’s governing treaty, the leaders said — an option that many had dismissed previously.
Mindful that markets on Monday would be watching the announcements from Brussels, the president of the European Council, Herman Van Rompuy, sought to reassure investors that the European countries were on track to reach a comprehensive deal at a meeting on Wednesday to stop the crisis from spreading.
“We are confident that we will get an agreement on Wednesday,” said Mr. Van Rompuy, whose group represents European Union governments. “The union must regain safe ground.”
With the Group of 20 meeting in Cannes in less than two weeks, European leaders clearly were making an effort to internationalize Europe’s crisis, with calls for more resources from the I.M.F., which has already participated extensively in the bailout of Greece.
“We’ve seen the debt crisis is really global. We want to reinforce the I.M.F.,” said José Manuel Barroso, president of the European Commission, the group’s executive agency.
“The I.M.F. is the most important global institution for financial matters,” Mr. Barroso said, “so it’s natural that countries that have a large external surplus can contribute to the common good and to global stability in financial terms.”
In the meantime, one of the roadblocks to agreement over the bailout fund — a rift between France and Germany — seemed to have eroded, with France retreating from its position that the European Central Bank should be used to backstop the euro bailout fund and Chancellor Angela Merkel of Germany asserting that there were now “two different models” under consideration.
Under one plan, a new body would be set up, financed by the current bailout fund but also seeking to attract outside investment. This body would buy bonds of troubled countries, providing that their governments agreed to make significant changes to improve their economic condition.
The alternative would involve using the current euro rescue fund to offer insurance against a proportion of losses on sovereign bonds.
A European official said the new entity could be created under the auspices of the I.M.F, while another minister said the head of the I.M.F., Christine Lagarde, supported the idea.
Prime Minister Fredrik Reinfeldt of Sweden, when asked about a fund involving non-European investors, said “That’s obviously on the table now.”
“If you are crossing that track, it is because you think you could get additional resources,” he said, while underlining that the leaders were “not ready” to commit to a solution after Sunday’s meeting. “That’s why we are meeting on Wednesday,” he said.
The meeting Sunday proved tense and difficult on several occasions, with consistent pressure on the Italian prime minister, Silvio Berlusconi, to push through tough changes as a condition of any further European support.
Mr. Berlusconi met with Mr. Barroso and Mr. Van Rompuy, over breakfast Sunday before going on to a meeting with Mr. Sarkozy and Mrs. Merkel.
German officials are angry at the behavior of Mr. Berlusconi, who promised to enact changes in August before the European Central Bank bought Italian bonds, but then tried to water down the program once the E.C.B intervened.
Europeans leaders, fearful that Italy could be the next applicant for aid, want the country to cut its €1.9 trillion debt load, which amounts to 120 percent of gross domestic product.
“Trust will not happen from a new package for Greece,” Mrs. Merkel said, aiming her comments at Italy. “Trust will only happen when everyone does their homework.”
Mr. Sarkozy also took a clear swipe at Italy, saying that he and Mrs. Merkel were not responsible for admitting nations into the euro that did not meet the original membership criteria.
Article source: http://www.nytimes.com/2011/10/24/business/global/24iht-euro24.html?partner=rss&emc=rss