Eurozone given five days to avert disaster

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10 April 2012
WEST END FINAL

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Europe has five days to strike a deal to rescue the euro or see the crisis gripping the continent deepen, the Government believes.

David Cameron will fly to a summit this weekend amid disarray over attempts to agree a plan to deal with Greece and other faltering single
currency members.

EU officials have been shocked by the "tensions" between Germany's Angela Merkel and French president Nicolas Sarkozy in recent days. The two leaders, whose axis has steered the eurozone, are at loggerheads over attempts to expand the stability fund set up to save the currency from disaster.

A special extra summit was called for next week, probably on Wednesday, after it became apparent that the pair will not agree before the original deadline of Sunday night. The view among officials is that a deal is needed by the time the markets open on Thursday.

Cabinet minister Owen Paterson said everyone was "extremely concerned" about the euro's prospects and added: "We have to see some decisions to see the euro steadied."

Shadow chancellor Ed Balls warned of "huge contagion problems" if nothing was agreed.
At the heart of the row is a dispute between Germany and France over how to expand the £400 billion European Financial Stability Facility to support Greece, Spain and other debt-laden countries to £1 trillion or more.

An insurance scheme underpinned by the European Central Bank was emerging as a leading option - but Mrs Merkel is arguing against the Bank having to carry the can in a failure.

There are also disputes about whether Greece should be left to default or bailed out with more money. And the leaders cannot agree how big the stability fund should grow, and how much taxpayer money should be put at risk.

The sense of confusion was deepened by the chaotic series of meetings that will take place over the next few days. The full summit of 27 leaders on Sunday could be truncated to allow the 17 eurozone members to thrash out their differences, which would mean Mr Cameron flying home early.

It is unclear whether the extra summit would be for the eurozone or all 27 leaders. "We may have to wait until Sunday night for clarity," said a British official.

Any failure to persuade the markets that a deal is possible risks causing shares to nosedive next week. The final deadline for a rescue package is next month's G20 summit in France.

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