Euro leaders race against markets clock

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Europe raced on Sunday against an Asian deadline, vowing to do "whatever is necessary" to prop up a debt-saddled euro before markets reopen, but Britain refused to underwrite a new crisis fund.

EU ministers gathered in Brussels for emergency talks, tasked by the leaders of the euro nations with heading off predatory threats to euro governments, commercial banks and wider economic recovery by the time markets open in Asia later on Sunday.

Spanish finance minister Elena Salgado, chairing the EU crisis talks, insisted on her arrival that the bloc will do "whatever is necessary" to shore up the eurozone.

"We are going to defend the euro, we think that we have to give more stability to our currency, and we will do whatever is necessary to reach this objective," she said.

However, in what could be its last act in power, the Labour government in London said it will seek to block calls for all 27 EU finance ministers to guarantee borrowings in the EU's name at emergency talks in Brussels due to begin at 3:00 pm (1300 GMT).

Chancellor of the Exchequer Alistair Darling said he will insist that member state guarantees sought to enable the European Commission to borrow on bond markets must come only from euro nations.

"What we will not do and what we can't do is provide support for the euro," Darling told Sky News TV after landing.

"I'm very, very clear that if there's a proposal to create a stability fund for the euro, that's got to be a matter for the Eurogroup countries," he said.

The bloc wants to borrow 60 billion euros (more than 75 billion dollars) based on unused, common EU funds, to fill a kind of "bank" that can be used to bail out troubled eurozone economies.

It could, in theory, use qualified majority voting to outgun London.

Britain fears a long-term impact on its taxpayers, with debts of a similar size to those of Greece, which has secured a commitment for 80 billion euros of loans from its currency partners.

Britain is predicted by the commission to have the highest public deficit in the EU this year, and the firm stance comes amid power-sharing talks that resumed on Sunday between Conservatives and Liberal Democrats in London.

"Between now and Sunday night we will have a watertight line of defence," euro finance chief Jean-Claude Juncker said after Merkel demanded "a very clear signal" to markets to back off.

"This is a important moment," said France's finance minister Christine Lagarde on her arrival.

An EU diplomat told AFP that the fund could additionally be backed by a "gesture" from their central bankers, that diplomats said translates into a mini-European version of the International Monetary Fund.

German finance minister Wolfgang Schaeuble pushed for just such an approach during the negotiations over Greece, the origin of a contagious debt crisis that sent shares tumbling across the globe last week and has left commercial European banks in the firing line.

Traders and analysts refer to the idea of the Eurpean Central Bank signalling that it would intervene to buy euro governmental debt as the "nuclear" option.

The ECB takes part in meetings between world peers in non-EU Switzerland starting on Sunday.

Typically coy, ECB chief Jean-Claude Trichet has not ruled out moves that could trigger a debt-buying spree, although he laid "responsibility" for the new backstop arrangements at the door of the EU's political masters.

In return for jamming a spoke in the wheels, Darling can expect pressure over Britain's refusal in March to back new laws curbing hedge and other high-risk investment funds, mostly based in the City and which eurozone critics say cost Europe dearly during market "attacks" on Greece, Spain and Portugal.

Spain's Salgado added that Madrid, labouring under debts exacerbated by the bloc's highest rate of unemployment and itself facing a squeeze on international money markets, "does not envisage" calling on the planned new common bailout fund.

French President Nicolas Sarkozy and Italian Prime Minister Silvio Berlusconi each pulled out of World War II commemorations in Moscow to drive efforts to find agreement, although German Chancellor Angela Merkel said she would attend Sunday's Red Square parade.

© 2010 AFP

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