Europe races to flesh out debt rescue plan
Europe raced Sunday to defend its financial health as Asian markets readied to open, with France citing "complete agreement" with Germany on new measures to defend crisis-hit euro nations.
US President Barack Obama held urgent telephone calls with German Chancellor Angela Merkel and French President Nicolas Sarkozy on the need to rebuild confidence in the markets before the chaos spreads.
Sarkozy's office said a deal with Berlin had been struck on measures to be announced later during emergency talks in Brussels to "resolve the financial crisis", sparked by Greece and threatening to engulf other debt-stricken euro nations.
But an order from euro leaders to fill in the blanks by late Sunday night had yet to result in any concrete announcement come 8:30 pm (1830 GMT) for a rescue mechanism for governments coming attack from speculators.
After shares tumbled across the globe last week, European ministers holding emergency talks in Brussels had been tasked with heading off predatory threats to government finances, commercial banks and wider economic recovery.
Their talks were marked by drama when Germany's Wolfgang Schaeuble was taken to hospital after an allergic reaction to medication -- and by dispute, when a British government in its final hours in power set tough conditions.
Merkel also lost a key regional election at home on Sunday, when voters angry over a Greek bailout dubbed the "fattest cheque in history" by tabloid Bild ripped away her coalition's majority in the upper house.
The setback for the German leader came just as the International Monetary Fund approved its 30-billion-euro share of the 110-billion-euro (145-billion-dollar) Greek rescue.
Despite the rising political cost of marbled debt across Europe, Merkel and Sarkozy, the latter having skipped World War II commemmorations in Moscow to help pull strings, were said to see eye-to-eye on "the means to be put into place to resolve the financial crisis."
"We will do whatever is necessary," Spanish finance minister Elena Salgado, chairing the EU crisis talks, had insisted beforehand, with Anders Borg of non-euro Sweden saying that "we cannot afford disappointment with the markets."
But in what could be its last act in power, non-euro Britain seemingly put paid to a proposal for all 27 EU nations to guarantee massive new borrowings on bond markets in the bloc's name, at a time when Portugal, Spain and Italy are coming under rising pressure from powerful speculators.
"What we will not do and what we can't do is provide support for the euro," British Finance Minister Alistair Darling said.
The bloc wants to create a kind of "bank" that can be used to leverage vast borrowings to bail out troubled economies -- as governments did with their banks during the global financial crisis -- while keeping interest rates down.
A European source said the commission can already raise 60 billion euros (more than 75 billion dollars) on the back of unused EU budget finances, but that to raise greater funds it also "needs member states' guarantees."
An existing 50-billion-euro facility is available only to non-euro members, and has been used in the past to help Romania, Hungary, Latvia.
A British diplomat said a new pot delivering another 60 billion euros posed "no problem... as long as the IMF has the same kind of involvement" -- in other words the power to impose strict conditions along the lines of the Greek model.
But a blanket willingness to put already heavily-indebted taxpayer funds into propping up the euro was ruled out amid power-sharing talks likely to deliver a new Conservative government within days if not hours.
The other main element on the table was to try and obtain from the European Central Bank what traders and analysts refer to as a "nuclear" option, which means Frankfurt agreeing to buy euro countries' bonds, or debt.
The ECB was involved in parallel meetings on Sunday.
"This is a important moment" for Europe, stressed France's finance minister Christine Lagarde, with Austria's Josef Proll labelling it "the biggest challenge since the euro's creation."
Diplomats said the overall direction translates into a mini-European version of the International Monetary Fund.
© 2010 AFP