Talks continue ahead of twin eurozone summits

Eurozone finance ministers were continuing discussions in Brussels today ahead of a summit tomorrow aimed at hammering out a solution to the region’s debt crisis, as reports indicated the Greek economy to be in even worse shape than feared.

Last night the ministers said Greece will receive its next €8bn instalment of aid next month, as long as the International Monetary Fund signs off on its part in the coming weeks.

The ministers also said they are working on a second rescue package for the debt-ridden country, which would include new aid money and contributions from the private sector.

However reports today indicate that the crisis in the Greek economy has deteriorated rapidly in the last three months.

A report obtained by the Financial Times claims that global lenders would need to pump over €200bn into the failing economy by the end of the decade.

Attention is now turning to bondholders who could be forced to accept severe cuts in debt repayments.

The 'confidential' debt analysis report also reveals the country's bail out could balloon to €444bn.

The latest revelations come before eurozone leaders meet tomorrow for the first of two summits aimed at resolving the crisis.

No final decisions will be made at the summit, with leaders to meet with their respective parliaments early next week before a second summit in Brussels on Wednesday.

A crunch summit was planned for last Monday, but German chancellor Angela Merkel and French president Nicolas Sarkozy announced a postponement until tomorrow after realising they were far from agreement on key issues such as a massive reinforcement of the existing bailout fund for struggling eurozone countries, and a major recapitalisation of European banks to help them withstand economic shocks.

Taoiseach Enda Kenny, who will attend tomorrow’s initial meeting, said the talks are not a “last chance saloon”, but admits they are crucial.

“There is never a last chance saloon in politics, but obviously people would like to see this matter cleared up,” he said.

“There is a crisis in the eurozone.

“Our view is that the flexibility and the facilities that are available under the EFSF (European Financial Stability Fund), and the decisions taken last July, can actually deal with this crisis.”

Meanwhile UK Chancellor George Osborne said the coming days will be “critical” for resolving the crisis.

Arriving at the talks this morning Mr Osborne warned that the crisis posed a “real danger” to all European economies, including Britain’s.

He said it was “in Britain’s national interest” that the crisis is resolved.