Debt crisis: Leaders’ dithering gives market fresh concerns
Investors have low expectations from crucial eurozone summit as member-bickering goes on
Published 26/10/2011 | 05:00
EUROPE'S leaders continued to give the markets plenty to worry about yesterday ahead of today's summit on the continent's sovereign debt crisis.
Stocks tumbled after British officials announced the cancellation of a meeting of EU finance ministers scheduled for today to decide on bank recapitalisation. Shares then made a partial recovery when it was confirmed the 27 EU leaders and 17 euro-area heads of government were still meeting.
The surprise decision not to hold a meeting of finance ministers means that Michael Noonan is due to stay in Dublin while Enda Kenny will fly to Brussels. A flare-up over the ECB and political turmoil in Italy also kept investors on edge.
Disputes raged in Rome and Berlin, while there was no sign of a deal in the negotiations between banks and governments to reduce Greece's debt to private sector bondholders.
Uncertainties also remained over the size of a planned bank recapitalisation and the scope for leveraging the rescue fund.
Most investors said they did not expect any real detail from today's summit.
German Chancellor Angela Merkel, fighting to secure parliamentary backing for eurozone rescue measures, said she opposed a phrase in the draft summit conclusions urging the ECB to go on buying troubled states' bonds. The draft supports a continuation of so-called non-standard measures in the current exceptional financial market environment.
"This sentence is not agreed with us," Ms Merkel said, adding that Germany, a country obsessed by the notion of central bank independence, did not want a declaration from politicians telling the ECB what to do.
The German parliament will vote today on the measures. Test votes in Ms Merkel's centre-right coalition showed she was likely to win a narrow majority of her own supporters, but 16 dissidents would either abstain or vote against the motion.
In Rome, Italian Prime Minister Silvio Berlusconi's coalition looked like it might collapse after the cabinet failed to agree on Monday night on raising the retirement age, a key economic reform demanded by Italy's EU partners as a condition for supporting its bonds.
Mr Berlusconi thundered yesterday that no one could teach Italy lessons.
The EC said the aim was not to humiliate Italy, but to ensure a member state met its commitments on budget discipline and economic co-ordination.
Tough negotiations also continued between eurozone governments and Greece's private bondholders over the scale of a writedown they will have to accept on Greek debt holdings.