Hopes dim of grand deal on debt at EU summit

Hopes dimmed Wednesday that European leaders could come up with the answers to the eurozone debt crisis at a summit crucial for the global economy, despite China offering to ride to its rescue. European Union presidents and prime ministers gather from 1600 GMT for their second summit in days with markets and world leaders urging a watertight deal to ward off fears of global recession. But draft conclusions leaked ahead of the talks show no deal on a figure for recapitalisation needs of banks as diplomats warned further meetings may be necessary later in the week. Finance ministers had given broad agreement to a 108-billion-euro ($150 billion) recapitalisation tab last week. It's "now or... never" German Chancellor Angela Merkel said of the bid to fix the euro's weaknesses. Senior diplomats too warned that negotiations with banks on a big write-down of Greek debt were proceeding slowly and that plans to boost Europe's bailout fund remained unclear. China however injected a note of hope that the eurozone might attain a goal to beef up the fund to more than a trillion euros, which would enable it to rescue large economies such as Italy and Spain. Top EU diplomats told AFP China has agreed to invest in the European Financial Stability Facility (EFSF), a clear signal that attempts to solve the eurozone crisis are truly global. The development came as global powers, from the United States to Japan and China, pressed European leaders for a lasting solution to the debt crisis before a G20 summit in France on November 3 and 4. Brazil, Russia, India and South Africa had "yet to" indicate if they would join China. Scrambling for a credible battle-plan to shield the eurozone once and for all, Merkel on Wednesday faced a new legal obligation to secure pre-summit parliamentary backing for any decisions aimed at preventing countries like Italy and Spain from becoming the new Greece. "It is going to be a long day," her spokesman Steffen Seibert said on Twitter. The spotlight will be firmly on Italian Prime Minister Silvio Berlusconi who was told by his peers after a first summit on Sunday to return to Brussels with proof of rapid action to cut a debt mountain six times the size of that in Greece.  Berlusconi will take with him a 15-page letter outlining plans for reforms, including a last-minute agreement with his Northern League coalition partner to raise the retirement age from 65 to 67 in 2026, Italy's media said. "Do people think Berlusconi's 15 pages is sufficient?," asked a top EU official, after sharp exchanges during Sunday's summit. "That is the big focus for the evening." Saddled with a 1.9 trillion euros in debt, equal to 120 percent of GDP, Italy is paying rates of nearly six percent to borrow on markets, almost triple Germany's borrowing rate. The size of the debt has stoked concern that the 440-billion-euro ($605-billion) EFSF war chest would be insufficient to rescue large economies like Italy and Spain so leaders are examining ways of beefing up its firepower. The text going before the German parliament refers to two models: one would insure jittery investors against potential future losses; the second calls for aid to be co-financed by public or private investors, including foreign countries. It is in this part of the plan that countries like China and institutions like the International Monetary Fund may well take part. "The two models are not mutually exclusive," the text says.  The summit, though, is unlikely to announce any headline figures. In Berlin, Merkel drew a new battle line on the eve of the meeting, insisting that leaders strike out a line in draft conclusions calling on the European Central Bank to keep buying bonds of struggling nations -- a role the EFSF is supposed to take over. British Prime Minister David Cameron is coming into the summit with his own gripe, demanding that the EU's 10 non-euro nations like his be associated with decisions of the 17-nation eurozone, who will break off amongst themselves to conclude the night discussions.