- Associated Press - Thursday, October 20, 2011

BRUSSELS Europe’s efforts to solve its escalating debt crisis plunged into disarray Thursday, after Germany and France could not bridge their differences in time for a summit Sunday, forcing them to call a second meeting.

Sunday’s summit was supposed to deliver a comprehensive plan to finally get a grip on the currency union’s debt troubles by detailing new financing for debt-ridden Greece, a plan to make Europe’s banks fit to sustain worsening market turbulence and a scheme to make the eurozone bailout fund more powerful.

The offices of French President Nicolas Sarkozy and German Chancellor Angela Merkel announced that they needed more time after it became clear that the currency union’s two biggest countries could not agree on the main points of the plan.

Both governments said that all elements of the eurozone’s crisis strategy would be discussed on Sunday “so it can be definitively adopted by the Heads of State and Government at a second meeting Wednesday at the latest.”

It also said that the two leaders would meet Saturday evening ahead of the summit in Brussels in the hope of making progress.

“The chancellor is confident that in this way good, coordinated measures for the stability of the eurozone can be achieved,” Mrs. Merkel’s spokesman, Steffan Seibert, told journalists in Berlin.

Mrs. Merkel’s address to parliament scheduled for Friday was canceled, and Mr. Seibert said it would take place next week.

The announcement of a second summit is likely to increase concern over the eurozone’s ability to stick together and stabilize the common currency. Sunday’s summit had been delayed from earlier in the week to give the leaders more time to agree on the key issues.

“The parochialism and procrastination that got us into this mess continues,” said Sony Kapoor, managing director of economic think tank Re-Define. “Unless EU leaders pull a rabbit out of their hat now, this will worsen the already deep politico-economic crisis that Europe is facing.”

European officials said ahead of the announcement that the eurozone remained deeply divided on important parts of its strategy on debt-ridden Greece, banks and its bailout fund.

Germany and several other rich countries have been pushing for banks and other private investors to take steeper losses on their Greek bond holdings, before the eurozone can sign off on a second multibillion euro rescue package for the struggling country.

France and the European Central Bank have so far opposed forcing banks to write off more Greek debt, fearing that would destabilize the banking sector and worsen market turmoil.

But Greece’s international debt inspectors warned earlier in the day that even under a rescue package tentatively agreed to in July the country’s debts were not sustainable.

In their statements Thursday, Mrs. Merkel and Mr. Sarkozy said that, based on the inspectors’ report, Greece should immediately start negotiations with the private sector to reach a deal “that would improve this debt sustainability.”

The eurozone is also divided on how to give its bailout fund more firing power, with the French wanting the ECB to help out, which Germany opposes.



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