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Second summit called as France, Germany continue to disagree over rescue plans

A resolution to the eurozone debt crisis still seems a way off as Angela Merkel and Nicolas Sarkozy fail to agree on a fix and call a second EU summit next week.

File photo of Angela Merkel and Nicolas Sarkozy.
File photo of Angela Merkel and Nicolas Sarkozy.
Image: Philippe Wojazer/AP/Press Association Images

THERE WILL BE no decision made by European Union leaders at this weekend’s key summit, according to the leaders of France and Germany, who called a second EU summit next week.

Following a bilateral meeting, Nicolas Sarkozy and Angela Merkel issued a statement to say that no comprehensive plan will be revealed by EU leaders by Sunday, reports the Wall Street Journal.

According to RTÉ, Taoiseach Enda Kenny has acknowledged that there are differences between euro area governments. However he is optimistic that an agreement can be reached over the next two EU summits.

The second summit will take next week, while this weekend’s will now be used as an interim meeting. Despite the disagreements, hopes are rising that a comprehensive plan on the debt crisis can be reached by Wednesday.

France and Germany are divided on how to use the EU’s temporary and planned-permanent rescue funds. France believes the European Financial Stability Fund should essentially function like a bank, which would have access to unlimited credit from the European Central Bank. However, Germany appears reluctant to sanction such a move.

It is understood that as much as €940 billion could be released by European governments to resolve the debt crisis, according to Bloomberg.

Today, the area’s finance ministers will meet for talks ahead of the weekend’s main discussions.

European stocks dont’ care

European shares have rallied this morning as investors remain optimistic that decisions will be made by EU leaders next week. The markets seem less concerned that a second meeting had to be called to ensure a fix is implemented.

According to Reuters, banking stocks performed well as markets react positively to the news of the second summit.

Meanwhile, in Greece, George Papandreou’s government has won a parliamentary vote on further austerity measures. The victory will more-than-likely ensure that Athens receives the next €8 billion tranche of its bailout loans from the EU and IMF.

The vote came following the death of a demonstrator during austerity protests in the capital.

The Greek question is also a contentious point at the euro area discussion tables. Yesterday, Germany once more pushed for “immediate talks” between banks and other private investors so they could take steeper losses on their bondholdings, to lighten the burden of the Greek debt pile.

Other EU governments – and the European Central Bank  – fear that any such involvement by private investors could spark more turmoil on the markets.

More: One dead after clashes in Athens over Greek austerity measures>

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