EUROZONE DEBT CRISIS

Gap opens up between euro ins and outs

By Ian Wishart - 27.10.2011 / 05:10 CET

Rifts emerge between eurozone 17 and the rest.
How the weekend unfolded
Council in brief

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Eurozone sets out stark choice for Greek voters

A meeting of European Union leaders that had been convened next week to discuss ways of promoting economic growth is shaping up instead to be a crisis summit on Greece.

Deadlocked Greece casts cloud on euro

Political uncertainty jeopardises Greece's ability to receive further instalments of international loans.

An EU-friendly French government?

Foreign Minister Laurent Fabius and European Minister Bernard Cazeneuve campaigned against EU constitution.

NOT QUITE IN TANDEM Angela Merkel and Nicolas Sarkozy at last weekend's European Council. REUTERS

Fact file

State of play

The options for how to boost the eurozone's bail-out fund, the European Financial Stability Facility (EFSF), were reduced to two after France backed down on its ambitions to use European Central Bank (ECB) money.

One option is to use the EFSF as insurance for sovereign bond-buying. The other is to create a separate fund using external international financing, principally through the International Monetary Fund, to purchase sovereign bonds from countries in trouble. Member states have spent this week exploring whether these two options could run in parallel.

The European Council agreed to allow the countries of the eurozone to explore “the possibility of limited treaty changes” to strengthen the governance of the eurozone.

No deal has been agreed yet on a plan to recapitalise banks, but finance ministers made progress. Leaders are expected to announce plans to address a capital shortfall of €109 billion in the European banking sector.

No agreement is reached on losses imposed on holders of Greek debt. The consensus is that the 21% haircut agreed at the 21 July summit should be significantly increased, but the ECB has previously warned that this could create panic on financial markets.

The European Council, encouraged by the leaders of France and Germany, asked Silvio Berlusconi, the prime minister of Italy, to return on Wednesday (26 October) and present a comprehensive plan for economic reform in his country.