Osborne: Real progress in EU crisis talks

British Chancellor George Osborne tonight declared “real progress” in Europe’s battle to beat the economic crisis and restore confidence in the stability of the single currency.

He emerged after ten hours of talks with fellow EU finance ministers in Brussels to announce “important decisions” to strengthen Europe’s banks.

He gave no details but the talks reached “provisional” agreement on recapitalisation of the banks to the tune of almost €100bn.

The accord is conditional on a complex and much wider EU deal being forged in the next few days, including a massive increase in eurozone bail-out funds and a planned 50-60% write-down of Greek debt to ease the country’s problems and reduce the risk of “contagion” to other, bigger economies such as Italy.

“It was very important today that Europe took decisions,” said Mr Osborne. “After ten hours of talks we have made real progress and we have come up with important decisions to strengthen European banks.”

The outline accord was just one part of the economic recovery jigsaw, said the Chancellor, adding: “Britain will keep up pressure in the next few days to a comprehensive package to resolve the European crisis and to make sure that we get jobs and growth.”

Tomorrow it is the turn of Prime Minister David Cameron, who will attend an EU leaders’ summit to add more safeguards to the EU’s economic armoury to counter a crisis which has threatened to get out of control.

On the table are a massive increase in an existing €440bn bail-out fund – possibly four-fold to about €2trn.

But more progress depends on resolving major disputes over details between German Chancellor Angela Merkel and French President Nicolas Sarkozy.

They were meeting over dinner in Brussels to thrash out concerns over how big the bail-out fund should be and how far to go to give Greece a huge “discount” on its mounting debts.

It was supposed to be a make-up dinner for two – but tonight they were being joined by International Monetary Fund chief Christine Lagarde, outgoing European Central Bank boss Jean-Claude Trichet, European Commission President Jose Manuel Barroso and EU Council President Herman Van Rompuy.

Earlier Mr Osborne emphasised the need for a long-term solution to the economic crisis and an end to ``short-term'' measures.

He insisted that a comprehensive deal would be the biggest boost for the British economy this autumn:

“”What we’re going to be arguing for at this meeting is a comprehensive solution to this crisis. We’ve had enough of short-term measures, sticking plaster that just gets us through the next few weeks.“

He repeated the Government’s case that a secure and stable euro is as important for the UK as it is for the single currency member states:

“The crisis of the eurozone is a real danger to all of Europe’s economies, including Britain’s.

“We need to address the root causes of the problem with a lasting solution that will help all of Europe’s economies.”

Tomorrow’s summit has already been overshadowed by a second summit – so far involving only eurozone leaders – in Brussels on Wednesday, by which time Berlin and Paris hope to have resolved their differences.

They are in the driving seat but have clashed in the last few days over exactly how to shore up the euro and persuade jittery financial markets that the single currency is solid.

The hectic diplomatic activity comes amid growing concern that the Greek crisis is even worse than feared.

Despite Wednesday’s make-or-break summit, some ministers, including Mr Osborne, have set the ultimate deadline as a G20 summit in Cannes in less than a fortnight, when world leaders gather to discuss the global financial crisis.